If you are young and healthy, you’d be stupid not think about Banner’s 35 & 40 year term life insurance!
Banner came out with a new 35 year and 40 year product this November, one which I think is worth a deeper look. Both 35 and 40 year products are extensions of Banner’s main line term insurance program (they previously offered 10,15 , 20, 25, and 30 year term), called OpTerm.
No I don’t know why it’s called OpTerm – it sounds like a truly terrible marketing name that got over optimized and focused grouped and now here we are.
If you’re not familiar with Banner, don’t worry. They are a subsidiary of Legal & General, a top 10 insurance company that often has the absolute cheapest prices – but they don’t advertise at all!
Cutting out expenses like advertising allows them to be so competitive compared to other carriers, but they also prefer healthy people – so you might be better off with Protective or AIG if you have serious health issues.
This is another reason why it’s critical to get life insurance when you are young and healthy – you can easily pass through the underwriting departments of some of the more strict carriers to get some truly stellar prices!
What’s Term Insurance Again?
Just as a quick refresher, term life insurance is the use it or lose it type – you pay a small premium for a defined length of time, in this case 35 or 40 years and in return, if you pass away before the end of the term, the life insurance company hands your beneficiary a nice big check.
Love it or hate it, term is an effective life insurance strategy – and with the addition of new 35 and 40 year periods, consumers have potentially many more use cases to use this product to plug any holes that might exist in their current financial plan.
Why Did 35 and 40 OpTerm come out?
Whenever a new insurance product is released, one of the most important questions to me is ‘Why?’
Without the “Why?’ question answered, it’s hard to determine who this is targeted to, and why it is better for you than any other solution currently out on the market.
4 Drivings Reason for longer term coverage
What started as a niche (people wanting terms that lasted longer than 30 years) has now become a tidal wave. Home owners have been refinancing at a high rate since the recession ended officially ended in 2009, taking advantage of historically low interest rates to refinance their homes.
(Ironically enough, everyone who wasn’t in danger of losing their home had a once in a lifetime opportunity to pay less than ever for housing)
Here’s the thing about refinancing a mortgage – it can restart the clock! With rates so low for years, many homeowners opted for a new 30 year mortgage. It made a lot of financial sense at the time, but either requires a new life insurance policy, or one that can last beyond 30 years.
2. Increased Debt
Carrying more debt than you were 10 years ago? You’re not the only one! Most Americans are reporting that they have more debt now than in 2008. A majority of the new debt comes from households with Student Loans, which should be no shocker.
Student Loan debt has increased to just over $1.5 trillion dollars, up from $671 billion in 2008 according to New York Fed data. This increase has been almost entirely absorbed by the young millenials just out of college and in their first professional jobs. Millenials are pushing back home purchasing, and at the current rate may not purchase homes until the age of 40. You can see how this ties back to the first point!
3. Increased Responsibilities
As much as millenials have had to push back the date on doing things adults considered normal a generation ago, generation Xer’s and young baby boomers are are also seeing their responsibilities extend well into their 60s and 70s.
Whether it is promising to pay off their own or a child’s student loans, taking care of a spouse or parent, or simply working longer than they expected, the next generation to face retirement has less guaranteed income coming in and more unpredictable cash outflows going out. A longer term policy helps cover any unexpected need that might pop up in their later working years or shortly before retirement.
4. Longer Life Spans
People are living longer, if not healthier lives. Progress has been made against many diseases. HIV is a good example – while we can’t cure it, it’s not the imminent death sentence it used to be.
The increase in longevity, along with the exponential amount of digital health data available to insurers allows them to better forecast survival rates out 40 years. Because there is now less uncertainty in the system, insurers don’t have to be as conservative in their estimates – which translates into a relatively cheaper policy for you!
Because forecasting survival rates is still more still more art than science (especially far into the future), Banner’s new term lengths could be a limited time deal. Banner’s products are priced much more aggressively than most whole life and universal life, which means they have much less room for error.
Whole Life and Universal life are much easier to calculate for insurance companies, because they know they are going eventually pay out (you didn’t plan on living forever did you?)
Banner is essentially doing the opposite. They are charging term prices for policy that lasts almost as long as a whole life, but they are gambling that when they hand out a 40 year policy to 40 year olds, 95% percent of people are going to either cancel their policy or live to the age of 81.
If more consumers than expected die during the term period, it could end up costing Banner a ton of money!
How Much Does it Cost?
Below is a sample rate for the Banner’s 40 year term quotes, – however, most people’s ages and situations don’t line up perfectly with example quote sheets so feel free to use the quoter on the right to get a better estimate of what you can expect to pay!
|Age and Gender||$100,000||$250,000||$500,000||$1,000,000|
|30 – Female||$15.82||$22.61||$38.48||$72.63|
|30 – Male||$19.24||$28.67||$52.18||$93.12|
|35 – Female||$17.58||$28.95||$52.74||$102.57|
|35 – Male||$20.21||$34.83||$64.49||$135.49|
|40 – Female||$23.27||$48.96||$91.26||$176.84|
|40 – Male||$27.73||$61.58||$114.14||$222.63|
|45 – Female||$34.18||$77.71||$145.15||$288.87|
|45 – Male||$41.93||$97.08||$188.99||$370.06|
When to use a 35 or 40 year Term policy
If you are young
This product is perfect for someone 25 – 35. If you fall into that age range you can cover your whole working career with a single 40 year policy.
The longest term now offered would allow a 30 year year old to be covered and pay a fixed price until 70 – No need to figure out when to replace your insurance policies!
Now you may prefer to ladder your terms, because not everyone needs the same insurance coverage for the their entire lifetime. The traditional ladder normally consists of a 10-15 year, 20 year, and 30 year coverage, so you’ve got two options:
If you are younger, you can simply slot everything up by 10 years so that you have a 20, 30, 40 year ladder which will go a long way in protecting your family.
If you are a little older or concerned with the price, you can always stick with the traditional ladder, but split the 30 and 40 coverage. That is to say if you had $500k of coverage at each level (which should probably be the minimum), you could split the last rung on the ladder into $250,000 of 30 year term and $250,000 of 40 year term.
Another reason to get a 35 or 40 year term life policy is to lock in a healthy rate for a very long time. If you’ve got some family history or just feel changing your diet to donuts and giving up on going to the gym 4 days a week in the future, it makes sense to get a 40 year and just treat this as the last policy that you are ever going to get.
Reasons to not use a 35 or 40 year Term policy
- You Live in New York (It is not approved for sale there)
- You don’t want to out live the coverage – there is no affordable way to extend the coverage after the 40 years are up. Remember, Banner needs most people to not actually trigger the death benefit to sell this product profitably
- You are over 50 – (or 55 for the 35 year OpTerm) The max age of maturity on these policies are age 90
- You don’t actually need 40 years of coverage – If you are well into your career and stashing away money and paying off the mortgage, you may only need life insurance up into your retirement
Want to lear more about Banner’s 35 or 40 year OpTerm? Schedule a quick meeting right now to see if you qualify!