When it comes to term life insurance, the biggest complaints are for the 30-year term limit. A lot of insurance companies only offer term life policies of up to 30 years. This is counterintuitive considering that term life policies have lower rates when compared to permanent policies, so it would only make sense to include longer terms.
Luckily, insurers are slowly opening to the idea of having term life policies running up to 40 years, and some have even introduced these products to the market. The best part yet is that these policies still offer affordable rates for significant coverage, just like other term life policies.
What is Term Life Insurance
Term life is a type of insurance policy tailored to provide coverage only for a predetermined period of time at a fixed rate of payments. This period is mostly up to 30 years and offers affordable rates when compared to other types of life insurance. The insured individual benefits from a significant coverage amount for low rates.
Unlike permanent life insurance policies that provide a death benefit and a cash value component, term life only provides a death benefit. This means that you can not borrow against the policy, like with permanent life insurance. The insurer calculates the rates based on an individual’s age, gender, health, and life expectancy. The risky you are to insure, the higher the premiums you pay.
Also, most term life policies are renewable in that, if you outlive your policy, instead of letting it expire you can renew it. And if you choose to renew your policy, you will be required to pay higher premiums than before because of the increase in age.
Do Companies Offer 40 Year Terms?
For a very long time, insurance companies have been offering term life insurance policies with lengths of 5years, 10years, 15years, 20years, 35years, and 30years. This is where the range for most term life products from insurance companies fell between.
Oftentimes the number of years could be increased once agreed upon with the policy provider, but this would only be a few years. Until recently, companies did not offer 40-year term policies. Term life policies are designed to provide coverage for a short-term period, but the 40-year term has completely changed the game.
While it is still fresh in the market, only Banner Life and Protective Life offer it as part of their term life policies.
40 Year Term vs Permanent Term(GUL)
Guaranteed universal life insurance(GUL), is a permanent type of policy only that, is only designed to accumulate the death benefit amount without a cash value component. This can also be compared to 40-year term life insurance which does not also offer a cash value component. The two policies also guarantee level premiums and a death benefit.
They also have a few differences that set them apart. For instance, a 40-year term life insurance means that the policy expires after a period of 40 years. GUL, on the other hand, has an expiration date of between 90years to 121years.
When it comes to the costs, a permanent term is more expensive than a 40-year term life policy. It offers a longer period of coverage, so the premiums become automatically more expensive than those for the 40-year term. Although you will pay higher premiums for GUL, your beneficiaries are assured of a death benefit whereas, with a 40-year term policy, the insurer only pays out to your beneficiaries if you die within that period.
On the brighter side, an individual in his/her late forties or fifties looking for a 40-year term life policy could also consider GUL as the difference between the premiums would not be very large. Whether you choose GUL or 40-year term life insurance, it is important to understand that the biggest reason is to protect your loved ones. The best choice is finding the maximum amount needed for low rates.
Why 40-Year Term is More Expensive Than 20 or 30-year Terms
40-Year term life insurance policies offer more coverage when compared to 20 and 30-year terms and also provide this coverage for a longer period of time. This mostly explains why they are more expensive. This is because the more the years increase, the older you grow. This brings you closer to your death increasing the chances of the policy paying out.
Also, as you grow older, your health deteriorates making you more vulnerable to diseases. To avoid high premiums caused by health, you can purchase a policy that also has a term conversion option.
In case you change your mind and decide to have life-long coverage, a term conversion rider would be a perfect go-to. Despite your health, it allows you to convert your current term life policy to a permanent policy. Converting to a permanent policy also means that premiums will increase because of a bigger age as well as the new policy.
Even if you outlive your 20/30-year term life policy and still need the coverage, you will be forced to renew the policy at higher premiums. This would be higher than you would pay for your older policy.
40-year Term Companies
Not all life insurance companies offer 40-year term life insurance. It is a relatively new product in the market and the two most common insurers with similar products are Banner Life and Protective Life Insurance.
Banner Life Insurance
Banner Life Insurance is one of the first companies to introduce 40-year term life insurance. It operates under Legal & General America, which is its parent company. Under the parent company’s brand, it also works with William Penn Life Insurance Company of New York to underwrite and issue life insurance policies in New York.
Banner Life Insurance has incredible ratings; A+(Superior) from A.M.Best, AA-(Very Strong) from S&P, and AA-(Very Strong) from Fitch. These ratings indicate reliability since 40-year term life insurance policies are long-term and the policyholder has to wait for a prolonger period before the policy can payout. This also shows that the company is stable and will be around for a while, so it will actually pay out such policies.
Banner OPTerm Life Insurance
The minimum coverage amount for Banner OPTerm life is $100,000 while the maximum amount is over $10,000,000. It also allows for the conversion of the policy into permanent insurance up to the age of 70years. Generally, Banner OPTerm life issue ages ranges from 20 years to 75 years. This is as shown below;
OPTerm 10 Year: 20-75
OPTerm 15 Year: 20-75
OPTerm 20 Year: 20-70
OPTerm 30 Year: 20-55
OPTerm 35 Year: 20-50
OPTerm 40 Year: 20-45
It also includes optional Policy Riders which includes accelerated death benefit(no-cost), term riders, children’s term riders(extra costs), and waiver of premium.
The Accelerated Death Benefit can pay out 75% or the lesser of $500, 000 in advance if an individual is diagnosed with a qualifying terminal illness. In case a total disability occurs when the coverage is active and stays for a minimum of 6 months, the waiver of premiums rider waivers all the premiums of up to the age of 65 years.
With Term Riders, an additional term insurance coverage is provided on top of the base coverage. This is usually for a specific number of years and allows you to increase your life insurance needs by having a 40-year plan as the base policy but with an additional short-term length to cover short-term needs. When these riders reach their end of term, they automatically diminish.
The Children’s Term Rider provides a level term benefit on the children of the insured party up to 25 years, although it can be converted into permanent insurance within the first 31 days after the rider expires. If both parents have or are applying for coverage, the death benefits amounts range between $5,000 to $20,000.
Protective Life also created a 40-year term life policy. Its ratings, just like Banner life, are superb with A+(Superior) from A.M. Best, AA-(Very Strong) from S&P, A+(Strong) from Fitch, and A1 from Moody’s Investor Services.
The Accelerated Benefit for Protective Life is up to 60% of the death benefit or $1,000,000, whichever is less. The Children’s Term Rider offers a death benefit of between $1,000 and $25,000 per child. It also has a Conversion Privilege rider which can last a maximum of 18years. Protective’s Waiver of Premium rider waives premiums when a total disability occurs as defined in the policy contract.
When to Get 40-year Term
Not everybody will qualify for a 40-year term life policy, also, it might not be a suitable option even for those who qualify for it. 40 years is a long time and individuals who can qualify for this policy are better-placed considering it offers low premiums rates. It is a great source for income replacement, which gives your loved ones peace of mind even after your demise.
Instead of renewing your 30-year term life policy, you have a longer 40-year term which helps you to avoid the high premiums after renewal. If a 30-year term life policy is not appealing to you, you could opt for a 40-year term life policy that has lower rates.
Buying a 40-year term policy helps to avoid a renewal offer in case you outlive your policy and forget to convert it to a permanent one. An important point to note is that once you renew your term life policy, it is done on an annual basis which will result in an every-year rate increase.
That said, below are instances when to get a 40-year term life insurance.
To Pay Off Mortgage
If you have a pending mortgage payment, then you could take out term life insurance to ensure that it is completely paid off even after your death. For instance, you have taken out a 40-year-old mortgage loan. Buying a 40-year term life insurance would help provide a source of income for your loved ones to repay the remaining mortgage. Since the mortgage matures at the same time as the life insurance policy, your loved ones won’t have to wait for long before they can make the next payment after your death.
Another reason for buying a 40-year term life insurance is for your final expense. The difference between final expenses life insurance and traditional life insurance is that final expenses provide a smaller face amount. While buying a 40-year term life insurance for medical and final expenses seen like more than needed, your family members can use the remainder of the proceeds for their additional needs.
You could also purchase a 40-year term life insurance policy as a way of replacing your income once you die. Perhaps you are the breadwinner of your family, and your loved ones financially depend on you to survive. If you die, they are left with no source of income which leaves them strained. On the upside, a 40-year term life insurance policy provides an income replacement source that supports their lifestyle.
Inasmuch as a child’s education is important, some spouses are left struggling with how to pay for it. If you have a young family or intend to start one in the future, then you will need a steady source of income. Think about the future of these kids, if you die will your surviving spouse be able to support them and comfortably pay for their education alone? If not then you might need a term life insurance policy. This would be suitable for an individual in their early or mid-twenties. By the time the life insurance policy expires, chances are that the kids are done with their education.
Shop Around With CFA Insurance
When you shop directly from an insurer, you have limited options, but shopping with us allows you to explore different life insurance options. We are made up of a team that clearly understands the market and will save you the time you would have wasted searching for the best insurance companies. At CFA Insurance, you get to work with professionals who you can trust to do all the hard life insurance work for you.