Term laddering for a young family: two policies instead of one

A 34-year-old with two kids under five, a $280,000 mortgage and a spouse who works part time needs a lot of coverage now and much less in 20 years. One 30-year policy for the full amount is the lazy answer and it's expensive. Laddering fixes that.

The structure. Two policies:

• A 20-year term for the big number, sized to replace income through the kids' school years. Call it $750,000.
• A 30-year term for the mortgage and the tail, say $300,000.

In year 21 the big policy ends, the kids are grown, the mortgage is mostly gone, and the client keeps the smaller policy for the remaining years. Total premium over 30 years is meaningfully lower than one $1,050,000 30-year term, and the coverage curve follows the actual need.

How to present it. Draw the two rectangles on a legal pad. Left to right is time, height is coverage. The stacked shape looks like a staircase. Clients get it in ten seconds and remember it.

Underwriting. Two apps means two paramed exams unless one carrier will do both with one exam. Some will, and it's worth asking. Apply for both at once; carriers can flag a second application from another company as a possible over-insurance issue, so disclose it.

Objection. "Why not just one policy?" Because they'd be paying 30-year rates on money they only need for 20. Show both premiums side by side.

Where laddering is wrong. Clients who'll drop coverage the first time money gets tight are better served by one modest policy they'll keep. Two policies are two things to cancel.

Anyone laddering with a conversion rider on the longer policy for a later permanent sale?