Life insurance allows you to cover your financial obligations and provide a financial safety net for your loved ones in the event of your death. But those obligations change as you get older and you have fewer financial responsibilities — for example, you pay off your mortgage or your children graduate college — so you the amount of life insurance coverage you need might change over time.
The ladder strategy allows you to pay just for the amount of coverage you need at each stage of your life. You stack multiple term life insurance policies with different coverage amounts and term lengths that will expire as your financial obligations decrease.
But because we all become more expensive to insure as we age, laddering multiple life policies early on allows you to secure the right financial protection for your family while locking in the most competitive rates.
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What is the ladder strategy?
To ladder life insurance means taking out multiple insurance policies with different coverage amounts and term lengths. You can intentionally stack these policies so you have the right amount of financial protection across different stages of your life.
The ladder approach applies only to term life insurance, which lasts for a set period of time, usually between 10 and 30 years, and then expires. Term life is easy to manage, doesn’t have any complex tax restrictions or limitations, and is affordable, which is why it can help you save money as part of the ladder strategy.
You can have multiple permanent life insurance policies, too. But since these don’t expire, you can’t really ladder them, defeating the purpose of saving money using the laddering approach.
How to ladder your life insurance
At first, you may need a larger death benefit to cover multiple facets of your life, from caring for your children to ensuring your student loan debts don’t fall on loved ones.
But as time goes on and your children grow up or your debts are paid off, you may only need enough coverage to cover a few outstanding expenses, like a mortgage or final medical bills.
The ladder strategy is designed according to this principle:
As you get older, pay down bills, and increase your savings, your financial obligations decrease and you don't need as much life insurance.
You ladder multiple life insurance policies so that they expire at different times.
This ensures that you’re only paying for the protection you actually need and not the coverage you needed 10 or 20 years ago.
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Why you save money using the life insurance ladder strategy
Life insurance policies are priced according to a few major variables:
How long the policy lasts: A 20-year term policy costs more than a 10-year term policy.
How much coverage you want: A policy with a $750,000 coverage amount costs hundreds more than one with a $500,000 coverage amount over its lifetime.
Your background: A person with a complicated health history will have a more expensive policy than someone without any health conditions, while younger applicants pay less than older applicants.
The ladder approach takes advantage of the first two variables by tapering off certain coverages when they’re no longer needed. Finally, it also takes advantage of the third variable by locking in low rates for each life insurance policy when you’re young and healthy.
→ Read more about how long your life insurance coverage should last
Consider how much life insurance you need
If you’re considering the ladder strategy, start by having a clear picture of your life insurance needs.
The amount of life insurance you need will depend on several factors, including if you have a spouse and the kind of financial contributions they make to your household, if you have dependents or plan to have children one day, and if you have any major liabilities — for example, a mortgage or student loans.
Most experts typically recommend anywhere between 10 to 15 times your annual income in coverage. We can also do the math for you. Use our life insurance coverage calculator to get an estimate of how much coverage you need.
Typically, it’s a good idea to review your life insurance coverage at major life milestones such as getting married, having a child, buying a house, or even switching jobs. The amount of coverage you need now will likely change in the future.
It’s important to consult an insurance or financial professional about your specific situation to get some guidance on whether the laddering life insurance policies works for you.
Example of life insurance ladder strategy
If you need $1 million in life insurance over your lifetime, that doesn’t mean you need $1 million in coverage at every point in your life. Your expenses are higher when you’re younger and have more financial responsibilities. As you get older and pay off some initial financial obligations, like a mortgage or your children’s college tuition, your coverage needs are likely to be lower.
By laddering three separate term life policies that equate to $1 million now and allowing them to taper off over time, you’re only paying the premiums when you actually need the coverage.
Here’s how it would work if you were a 35-year-old non-smoking male in good health based on these three policies:
Policy 1: A 10-year term life policy with a $500,000 payout
Policy 2: A 20-year term life policy with a $300,000 payout
Policy 3: A 30-year term life policy with a $200,000 payout
You have a total of $1 million in life insurance now, and as you get older and need less protection, your coverage amount decreases.
The example below illustrates what that means for your finances — and how much you’d end up saving.
Even when all three original policies become active simultaneously, the monthly cost of all three premiums combined is cheaper than the single monthly premium you’d have to pay for a $1 million policy with the same duration.
Laddered life insurance vs. a 30-year-term life policy
Below is an example of the difference in premiums between laddered policies and one 30-year term life policy with the same total coverage amount.
Laddered life insurance monthly payments for $1 million total coverage
Ladder strategy | Monthly premium |
$500,000 policy for 10 years | $14.76 |
$300,000 policy for 20 years | $16.69 |
$200,000 policy for 30 years | $21.56 |
Total cost: | $51.21 |
Methodology: Average monthly rates are calculated for a 35-year-old, non-smoking male in a Preferred health classification obtaining a 10-year $500,000 term life policy, a 20-year $300,000, and a 30-year $200,000 term life insurance policy. Life insurance averages are based on a composite of policies offered by Policygenius from Banner Life, Brighthouse Financial, Corebridge Financial, Foresters Financial, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 09/01/2023.
30-year term life insurance monthly payments for $1 million total coverage
Single policy | Monthly premium |
$1,000,000 policy for 30 years | $75.91 |
Total cost: | $75.91 |
Methodology: Average monthly rates are calculated for a 35-year-old, non-smoking male in a Preferred health classification obtaining a 30-year $1 million term life insurance policy. Life insurance averages are based on a composite of policies offered by Policygenius from Banner Life, Brighthouse Financial, Corebridge Financial, Foresters Financial, Lincoln Financial, Mutual of Omaha, Pacific Life, Protective, Prudential, Symetra, and Transamerica. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies are available in all states. Rate illustration valid as of 09/01/2023.
How much can you save with a life insurance ladder strategy?
As the illustrated example shows, the ladder strategy can save you over 50% on your term life insurance by staggering multiple policies rather than buying one large policy.
This doesn’t mean that everyone will save 50% with a ladder strategy — your premiums will vary depending on age, gender, insurer, health, hobbies, and other factors that make up your unique profile.
But as you can see from the example above, building a ladder strategy is a very effective way to lower the cost of your life insurance over time if you need a lot of coverage now, but won’t necessarily need it later.
Should I use the life insurance ladder approach?
Laddering life insurance is a good financial strategy if you know what your future expenses entail. You can save a lot of money in the long run. If you get a term life policy to cover dependent care now and buy a policy with just enough protection to cover small expenses later on, even that smaller amount of coverage will be a lot costlier.
“Financial obligations and situations as a whole can, and often do, change over time. The goal is that over time your assets will increase and debts will decrease,” says Patrick Hanzel, advanced planning manager and certified financial planner at Policygenius. “Laddering is a good solution when there is a clear timeline for these changes. It will both save you premiums and provide the proper amount of coverage when it is needed.”
If, on the other hand, you’re unsure of what your finances are going to look like in the future, or if you already know your financial obligations won’t change over time, getting multiple life insurance policies isn’t a cost-effective financial strategy.
How to pick the right life insurance ladder strategy for you
Each policy comes with administrative fees, so stacking more than two or three policies can become more expensive and cumbersome in the long run. Working with a financial advisor can ensure that you set up a life insurance ladder plan that saves you money and provides the coverage you need at different stages of your life.
A Policygenius expert can help you evaluate how much life insurance you need, design your ladder strategy, or apply for one single life insurance policy to get you and your loved ones enough coverage. At Policygenius, our brokers are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice tailored to your personal situation.
Frequently asked questions
What is a life insurance ladder?
Laddering life insurance is a strategy that involves setting up multiple policies with different term lengths and coverage amounts to suit your needs as they evolve over time.
Can you ladder life insurance?
Yes. You can ladder life insurance — or stack multiple term life insurance policies — to make sure you have the right amount of coverage at each stage of your life. Whole or permanent life insurance policies cannot be stacked because they don’t expire.
How do you ladder life insurance policies?
You buy multiple term life insurance policies with different coverage amounts and term lengths. Ideally, as you grow older, some of the policies expire so you're only left with the coverage you need.
