4 Reasons for Layering or Laddering Life Insurance Policies
Key Takeaways
- Layering or laddering life insurance can provide enhanced financial security for your loved ones.
- Purchasing a guaranteed issue life insurance policy in addition to other insurance can help earmark easily accessible funds for final expenses.
- Layering life insurance can help avoid gaps in coverage from a term policy.
- If you have an insurable interest in a parent or loved one, purchasing a guaranteed issue policy for them could make final expenses more manageable.
Life insurance can protect your family’s financial well-being after you’ve passed away. However, it’s important to understand how different types of policies may provide benefits. Some of the most common life insurance options include:
- Whole: Whole life insurance provides lifelong coverage as long as you pay your premiums. That premium amount can be relatively high, but a portion goes into a tax-advantaged savings account that grows in value.
- Term: Term life insurance provides coverage for a set period of time, most commonly 20 years. Premiums are generally lower than whole life insurance.
- Universal: Universal life insurance is permanent insurance that allows adjustments to premiums and the death benefit over the policy’s term.
- Variable life insurance: Variable life insurance is permanent insurance that lets you select investment options for your cash value account.
- Guaranteed acceptance life insurance: This type of whole life policy is designed for adults over 50. Unlike other life insurance, it doesn’t require a medical exam to qualify and is open to people with health conditions.
While it’s important to choose the right life insurance for your needs, you are not limited to just one policy at a time. Layering or laddering life insurance is a strategy of purchasing multiple policies to fill coverage gaps and access more benefits.
Even if you already have another form of life insurance, enrolling in guaranteed acceptance life insurance can help bolster your coverage. Here are four reasons why some people choose to ladder their coverage with a guaranteed acceptance policy:
Secure your family’s future with Guaranteed Acceptance Life Insurance.
Contact GoHealth to find coverage that fits your needs.
1. Paying End-of-Life Costs
If you already have term or whole life coverage, you may intend for those funds to replace your income after your death. Surviving loved ones can use that money for monthly bills, to pay off a mortgage, or to support your children’s education.
Guaranteed acceptance life insurance generally provides a smaller death benefit than other forms of insurance, but it can be used flexibly for a range of final expenses. Layering life insurance policies may be a way of designating a specific amount for:
- Funeral and burial arrangements
- Outstanding medical bills
- Probate costs
- Other debts
2. Extending Coverage After a Term Policy
The main drawback of a term life insurance policy is that you eventually reach the end of your coverage, and it may become harder to find an affordable policy as you grow older. One solution is layering term life insurance policies with different end dates so that you’ll have more coverage while you’re younger and prevent gaps as you age.
Adding a guaranteed issue policy, which doesn’t come with a time limit, can be another way to avoid coverage gaps. Since there’s no medical exam required, you can start new coverage when you’re nearing the end of a policy term even if you’ve developed health conditions.
3. Leaving Accessible Cash for Family
Many life insurance policies have a two-year contestability period following enrollment. During this time, the insurance carrier can question whether all the information you provided on your application was accurate and potentially refuse to pay out if there are inconsistencies. Even after that two-year period, there may be other delays in issuing payments to beneficiaries.
On other hand, guaranteed issue policies usually pay out quickly and are uncontested, though benefits may be limited during the first two years after enrollment. This type of insurance is a convenient choice for giving loved ones fast access to the financial resources they need for any immediate costs, such as to a funeral home.
4. Covering a Loved One
Layering policies for yourself is not the only reason you may decide to add guaranteed issue life insurance to existing coverage. You may want to get a policy for your parents or grandparents to ease the financial burden of funeral costs and handle any other expenses privately and directly.
To get a policy for a loved one, you must demonstrate to a carrier that you have an insurable interest, which means you stand to experience financial strain from their passing. You will need your relative’s consent to obtain a policy that’s appropriate to your financial needs. If you will be responsible for final expenses after the death of a parent or grandparent, guaranteed issue life insurance could be the right choice.
Layering life insurance for full coverage and accessible cash resources could make a difference in your financial well-being or that of your loved ones. Explore the benefits and premiums available for guaranteed issue policies to determine whether there’s an option that’s right for you.
Secure your family’s future with Guaranteed Acceptance Life Insurance.
Contact GoHealth to find coverage that fits your needs.
Sources
How to use the ladder strategy to save on life insurance. Bankrate.
Navigating Life Insurance for Parents over 60. Colonial Penn.