Term insurance ladders are a popular strategy for structuring life insurance coverage. The idea is simple: layer multiple term policies with staggered end dates to align coverage with evolving financial needs. Done right, it can save clients money and prevent over-insurance. But like most planning strategies, term ladders aren’t one-size-fits-all.
For clients in average health or with clear, time-bound financial obligations—like a mortgage or college expenses—a term ladder can be efficient and cost-effective. But what if your client is extremely healthy and qualifies for top-tier underwriting? Suddenly, the "buy short and cheap" mentality might miss the mark.
Here’s why:
Policy Fees Add Up: Multiple term policies mean multiple policy fees. Over time, that can eat into the savings the ladder was supposed to create.
Requalification Risk: If the client’s health changes even slightly, renewing or adding coverage later could become costly—or impossible.
Missed Long-Term Value: Ultra-healthy clients may have access to very low rates on 30-year terms or even permanent options. Locking in now could save them far more than laddering shorter terms.
Conversion Opportunities: Some longer-term policies offer valuable conversion privileges. Shorter ladders may miss this flexibility.
In short, term ladders can be a smart tool—but they’re not always the smartest choice. Especially when working with clients in excellent health, it’s worth zooming out and weighing long-term certainty vs. short-term savings.
Want help evaluating whether a ladder or a longer-term policy makes sense for your client? Let’s talk.
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