What Does Laddering Mean?
Laddering is an investment technique in which different investments are made with the goal of having them mature at different points in time. This way, the gains can be spread out as opposed to appearing all at once.
In the context of insurance, many people choose to use "laddering" with regard to life insurance. In these circumstances, they purchase multiple policies that provide coverage for a certain amount of time. This spreads the coverage out and extends it according to the policyholder's needs.
Insuranceopedia Explains Laddering
The reason why laddering is often used in life insurance is because there may be more need for life insurance during the time the insured has young children. However, that need may diminish as the children get older and can start taking care of themselves. So instead of buying one premium life insurance policy for eighteen years of coverage, a parent a with young children may buy two life insurance policies: one that provides for 15 years of a larger amount of coverage and another one that provides a smaller amount of coverage for 25 years. This way the children would have more coverage while they are younger and less coverage while they are older.