When you purchase life insurance, you are purchasing a safety net for your family and loved ones if something happens to you. If something does happen to you, your family members can use your life insurance benefits to cover any financial obligations and/or debts you may have, and meet other ongoing financial needs, particularly if you were the sole financial provider.
Life insurance ladder policies are a type of life insurance policy.
Let’s dive into what they are, how they work, and how Everyday Life Insurance utilizes them.
What are ladders?
The amount of life insurance protection that a person needs throughout their lives can vary. In order to only pay for the amount of life insurance protection you need at certain points in your life, you can purchase a laddered life insurance policy.
Building a ladder in a financial sense involves creating ‘rungs’, or ‘steps’ – purchasing different versions of the same thing at the same time. In the life insurance sense, when you build a life insurance ladder, you are purchasing term life insurance policies with different term lengths. For example, you can purchase three different policies, each for $300,000, at the same time, but ladder these policies so that they last for different periods of time – 10 years, 20 years and 30 years.
How does laddered life insurance save you money?
Laddered life insurance policies can reduce the cost of your life insurance policy over the longer term. The ladder strategy is designed with the following premise in mind – as you get older, your children grow up and your savings increase, which means your financial obligations decrease and you need less life insurance coverage.
Laddered life insurance policies can reduce the cost of your life insurance policy over the longer term. Instead of purchasing a single, 30-year term policy, you purchase different policies at different lengths and ladder them on top of each other so that they expire at different times. As the laddered policies come to an end, the costs automatically go down, leaving you only with the coverage you need and premium payments lower.
How we use term laddering for mortgage protection
A mortgage balance doesn’t drop in a straight line. Under a loan’s amortization schedule, the balance falls slowly at first and faster in later years. A single flat policy leaves you over-covered as the balance shrinks.
Everyday Life’s Mortgage Protection Insurance (MPI) uses term laddering to solve that. We stack blocks of coverage to follow your loan’s amortization, so your death benefit tracks what you actually still owe. If the worst happens, your family has what they need to pay off the mortgage and keep the home.
Your online life insurance experts
If you want coverage that follows your home loan, try out our Mortgage Protection Insurance calculator. If you’re looking for standard life insurance to cover income, family, or other debts, use the ultimate life insurance calculator to see how much coverage you may need.
