How to decrease your term life insurance through laddering

Crossing “getting life insurance coverage” off your to-do list is a huge accomplishment, and one that will stay crossed off for the length of your term, be it 10, 20, or 30 years, so long as you continue to pay your premiums. However, you might have major changes in your financial life which need reflecting in your life insurance coverage. (Read: you don’t want to get stuck paying for more life insurance than you really need.) One of the most unique things about Ladder is that we offer flexibility in life insurance during these pivotal moments, or any other moments you deem necessary. We allow “laddering,” or moving the amount of your policy up or down based on your circumstances. 

Here are several situations when you might want to consider laddering down your policy, which you can do in the Ladder app, and how to apply to increase your policy coverage should you need more. 

A child graduates from college

Congrats, you made it to graduation! It’s a milestone full of the significance of your family’s hard work, personal growth, and educational investments. In financial planning, it’s also a natural inflection point where parents can reevaluate their term life insurance policy. 

Let’s say you secured a term life insurance policy while your child was young, to cover any potential expenses that might occur during their lifetime should you pass away suddenly. Now that you no longer have to pay tuition and your child is officially “off the payroll” making their own way in the world, the coverage you had in place to support the potential tuition bill can most likely be reduced, if not terminated. (This of course depends on what else is going on in your financial life with additional children, mortgages, and other expenses.) 

This is also an excellent time to speak to your new graduate about potentially getting a life insurance policy for themselves. While it might not seem necessary when they don’t have anybody depending on them financially, they could in the future. Term policies are on average much less expensive for healthy young adults, and the price is locked in for the length of the term. 

You pay off your mortgage 

Paying off your mortgage is another enormous financial achievement. You’ve diligently paid your principal and interest over the years, and now it’s time to sit back and enjoy the home you own outright. This is another life moment where it could be a good idea to reevaluate your life insurance needs. Should you unexpectedly pass away at this point in time, your house would be taken care of and not be a financial burden to your loved ones. Of course, you might have other financial responsibilities to consider, but it’s another natural point to pause and think about your coverage. 

You sold a business or paid off business debt

If you own your own business, you might have a loan. And if you’ve paid off that loan, that’s another cause for celebration—and a chance to reevaluate your life insurance. The same goes for if you sold the business outright. Any lessening of debts, personal or business, is an occasion to reconsider your life insurance coverage needs. 

Your employer offers group life insurance

Laddering allows you to be strategic with your term life insurance in ways that traditional plans can’t allow. That includes supplemental life insurance above what your employer is offering for group life insurance. Since most group life insurance policies are fixed amounts and not portable, having term life insurance with a flexible policy like Ladder offers can allow you to save money while keeping your family protected, no matter who your employer is. 

If your employer, for example, is offering $150,000 in group life coverage and you have a voluntary term life insurance policy with Ladder, you can fill the gap with an additional $850,000 in coverage. If you move jobs five years later and your next employer offers you $250,000 in coverage, you can ladder down your supplemental term life insurance policy with Ladder to only $750,000.  This right sizing allows you to have full control over your policy. 

Life insurance policies from traditional incumbent insurers don’t allow this flexibility. You’d have to remain overinsured or cancel the policy and start all over again, most likely at a higher rate because you’ve aged five years.

What about laddering up coverage? 

If you take on more financial responsibility, such as a mortgage or having another child, you might want to “ladder up” your coverage. This is an easy process to do as an existing Ladder policyholder but does require a new application for a new policy. For example, if you need an additional $200,000 in coverage because you had another child but have an existing $500,000 policy with us, you will need to apply for an additional $200,000. Your total will be $700,000 in active coverage over two separate policies. You can start an application in the app under “Account Policy,” or reach out to our customer care team.

Curious about how much life insurance you might need? Check out our easy online calculator.

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