How to Ladder Your Life Insurance

how to ladder your life insurance

When you buy life insurance, you want to get the best amount of coverage without breaking the bank, right? You might want to consider the laddering strategy. When you ladder life insurance, you can get the coverage you need and pay less for it.

How Do You Make A Life Insurance Ladder?

To ladder life insurance, you buy multiple term policies at varying lengths of time. For example, if you want $1,000,000 in coverage, you can stack three policies:

  • A $500,000 10-year term policy
  • A $300,000 20-year term policy
  • A $200,000 30-year term policy

Term policies are generally less expensive than whole life. Over time, your premium payments will be lower. Over your lifetime you’ll pay out a lot less, maybe as much as 50% less, in premiums.

Why It Can Make Sense to Ladder Life Insurance?

The financial protection you need changes over a lifetime. That 10-year policy might be perfect if your children will be financially independent by the time the term expires. The $300,000 payout from a 20-year term policy could be great for helping your spouse pay off the mortgage in the event of your death. When that expires, your beneficiary will still have the 30-year policy to fall back on.

Ultimately, you’ll pay a lot less for the protection you need at different periods in your life than you would if you had purchased a $1,000,000 30-year policy. As each shorter-term policy terms out, you can put that money towards savings.

Should I Ladder My Life Insurance?

If you don’t believe you’ll need the full $1,000,000 coverage for your entire life, it makes sense to ladder. Maybe you have a financial plan in place to save aggressively and you won’t need a full 30-year policy with a $1,000,000 payout.

Laddering might be an attractive option for you is if you don’t want to pay the high price of a single $1,000,000 30-year policy. If you have health issues, for example, the cost can be exorbitant.

How to Get Started?

Talk to your life insurance company to find out about your laddering options and put together a package. You can also shop around and get each policy from a different insurance provider. Explore your possibilities using our online quote generator to help you compare policies and pricing before making a decision.

About Barbara Howington

In a 40-year career that began as editor for a college public affairs department, Barbara has been an instructional media script writer, public relations director, marketing manager, account manager, and co-owner of a graphic design, marketing and public relations firm. For the past several years, she has funneled her knowledge and insight into copywriting, her favorite part of every professional position she’s held.