What "term period" should I select?
When you buy term life insurance, it is best to try for a balance between safety and cost.
It is safer to buy term life insurance with a long term period rather than to buy a series of policies with short terms of coverage. This is because your life insurance policy's premiums are locked in under the rate class you held when the policy first went in force. If you developed a terminal disease in year one of a 30-year policy, you could keep paying Preferred rates for the next 29 years. On the other hand, if you developed a terminal disease in year one of a 5-year policy, you may not even be able to obtain new coverage after those five years elapsed. At very least, your rate class would be must poorer and your premiums much higher.
It is cheaper to buy term life insurance with a short term period, though. As the foregoing example illustrated, the insurer takes on less risk when it issues a short-term life insurance policy, so it doesn't need to charge as much. Since our life insurance needs tend to change as our lives progress, it makes good sense to buy short-term life insurance in order to meet the needs of the present.
A compromise
You can get the security of long-term life insurance and the cost-efficiency of short-term life insurance by carrying multiple term life insurance policies at once. Life insurance needs tend to decrease as we age, so may do well to buy a long-term policy that provides a minimal death benefit, a medium-term policy which will provide a bit more, and a short-term policy which will provide a bit more still. If you were to die in five years, all three policies would pay off, and your life insurance needs would be met. If you were to die in 15 years, two of the policies would pay off, and your life insurance needs would be met. If you were to die in 25 years, one of the policies would pay off, and your life insurance needs would be met.
