Hunting Happiness

We have finally gotten serious about looking at and obtaining life insurance. We are planning on going with AIG because of their A++ rating and generally good reviews online. At this point I have had several conversations with a representative and answered a fair number of detailed questions. He indicates that he is extremely confident in his categorization of me at “Preferred Plus” (the highest) and SomeGal at “Preferred” (second highest). Of course I am still suspicious since they have a huge incentive to initially quote low to get the full application and then come back with “well you missed this one thing” type excuse.

I will post more as the process progresses but for now here are the numbers rounded to the dollar. We’re looking at $1.5 million on each of us.

SomeGuy: 10 year: $37; 20 year: $56; 30 year: $88

SomeGal: 10 year: $39; 20 year: $62; 30 year: $95

I went in expecting to be in the “standard” class with substantially higher rates and was thinking 10 year terms. If we end up as quoted above, I am tempted to jump to the 30 for our base policies. I have also confirmed that there is no issue with having multiple policies, even from the same carrier. Why the heck would someone want to do that? My thinking is to do a laddered life insurance policy similar to a CD ladder. Perhaps a “base” 30-year for $500K, then a month or two later a second step for $500K on a 20-year and a third step for $500K on a 10-year. There would be three main advantages in this case.

1. Flexibility. If at some point we decide less coverage is needed, we can let one of the steps lapse without touching the others. That way we don’t have to qualify and pay rates at whatever age we are then, with higher to much higher rates. We also would have flexibility in the event we had a long-term or permanent financial issue and couldn’t afford the quarterly premiums on all three steps.
2. Protection. Having three policies and thus three payment due dates means that if we accidentally miss a payment (or have a major problem — eg hospitalization) we don’t lose all coverage.

There doesn’t seem to be any “base” in the price of life insurance, so the only disadvantage I see to laddering is the (somewhat minor) hassle of maintaining a couple different policies.