If you have just started looking into getting a life insurance policy, you might come across the term "ladders" as you are evaluating different options. With life insurance, a ladder is a term used to refer to purchasing different life insurance policies, and here are several things you should know about ladders with life insurance.
What it means
A ladder simply refers to the process of purchasing different polices of life insurance either at the same time or at different times. Each policy serves a different role and may be for a different amount and length of time, and each policy might also be a different type of insurance. Generally, though, ladders are most commonly used when buying term life insurance, which is a type of policy that offers a specific payout amount if the person dies within a certain amount of time. In other words, a term policy is only valid for a stated length of time. This time frame might be 10 years, 20 years, or 30 years, or it could be a different amount of time.
Why people purchase different options
People that buy life insurance in ladders generally do so to cover different types of risks. For example, a person might buy a 10-year life insurance policy to ensure that his or her spouse could pay off the house if death occurred during this time period. This person might also buy a 30-year policy to make sure that there is plenty of money available to raise the kids and pay for their college educations. Buying different policies gives you the ability to cover all your risks and to only have the coverage while you need it.
How to determine if you should purchase ladders
If you are not sure if this is a good idea for you, there are several things you can do. The first thing is to think about your life now and in the next 10, 20, or 30 years. As you think about this, you can determine if you feel there is a need for different levels of coverage during those years. Secondly, you could talk to a life insurance agent to find out more information about different types of coverage and the options you have.
Ladders in life insurance are not always necessary, but they can be helpful in many situations. If you would like more information about life insurance options, contact a life insurance agent today.