Term Life premium

[elessar78]

So I applied for $300K in 30 yr term life insurance and got approved. I'm looking over the paper work and for the first 29 years of the policy my premiums/annual payments are a low $347. In year 30 the premium jumps dramatically to $8,867, is that normal?

Is that because this is a 30 year term policy? To keep it in force after the 30 years (which I don't plan on) it would cost that much? Also, I'm not obligated to keep it after the 30 years, right?

It seems like such a simple question but I've never encountered this before and wanted to make sure.

[disneysteve]

I've never heard of that. The whole point of level premium term is that the premium is the same for the full term. Of course, all you'd need to do in this case is cancel the policy at the end of year 29.

[elessar78]

Yeah, it struck me as weird too. I have an e-mail in to our rep. But just wanted to cross reference from unbiased sources.

[MonkeyMama]

It's just a sales tactic. We received a similar paperwork, showing what our premiums would be in 30 years. See, better lock them in or they will jump to some absurd amount in 30 years. Yeah, sure.

You shoud be able to cancel a term policy ANY TIME. Read the fine print, I suppose.

[disneysteve]

I wonder if that is the cost of the last year or the cost AFTER the last year to continue coverage. The latter would make more sense.

[MonkeyMama]

I presume she meant after 30 years, to continue coverage.

[jefffou]

It's just a sales tactic. We received a similar paperwork, showing what our premiums would be in 30 years. See, better lock them in or they will jump to some absurd amount in 30 years. Yeah, sure.

You shoud be able to cancel a term policy ANY TIME. Read the fine print, I suppose.

Yeah, the idea is to show you that IF you purchase the 30-year product and IF you were to continue to buy a 1-year term policy after the 30-year term is completed, you would pay $8,867 the next year. Not only is showing this large annual payment amount a sales tactic, it also confirms to the applicant that their insurance lasts for term applied for, period.

What the insurance company would rather you do, however, is to buy the cash value policy. Buying the cash-value would, of course, lower your premiums in the 30th year, but thousands would be paid over the next thirty years to acquire that benefit. I have no comment if that's good or bad in your case.

For insurance companies, term life insurance is often viewed by insurance companies as somewhat of a commodity used to convert term-policy holders to lifetime cash value policies later in the owners' lives.

Hope this helps.
Jeff

[elessar78]

For insurance companies, term life insurance is often viewed by insurance companies as somewhat of a commodity used to convert term-policy holders to lifetime cash value policies later in the owners' lives.

Hope this helps.
Jeff
401k Advice

Yep! Very helpful. When you said it, I didn't find it surprising. I've dealt with several agents/salesmen and it's kinda what they try to push you into.