Did you know that 34% of Americans are looking to buy life insurance in the next year? If you’re one of them, and you’re considering term life insurance, you’ve come to the right place. Where your life insurance is concerned, there are a number of decisions you need to make.
When considering a term life insurance policy, one of the most important decisions will be deciding on a term life insurance length. Term life insurance comes in 10, 15, 20, 25 and 30 contracts, making it one of the most flexible types of life insurance you can buy.
- 10 Year Term Life Insurance Length = 10 years of fixed premiums
- 15 Year Term Life Insurance Length = 15 years of fixed premiums
- 20 Year Term Life Insurance Length = 20 years of fixed premiums
- 25 Year Term Life Insurance Length = 25 years of fixed premiums
- 30 Year Term Life Insurance Length = 30 years of fixed premiums
While the 20 and 30 year policies tend to be the most popular, we’re here to help you determine which length will best suit your needs. But before we get to that, let’s take the opportunity to talk about what makes term life insurance unique.
Why Buy Term Life Insurance?
Life insurance is a must-have. Many people who don’t have it avoid buying it because of cost, but 80% of people overestimate the cost of life insurance. When compared with the cost of funeral services, estate taxes, and any outstanding debts, the cost of life insurance is comparatively small. When considering term life insurance, it’s often even smaller.
That’s the first perk of term life insurance–it can be more affordable, especially early in life, than permanent insurance policies.
Term life insurance is the most affordable type of life insurance coverage available.
Another pro is that there are now several life insurance companies that will allow you to apply without having to undergo a physical exam.
Many term life policies offer a living benefit as well as payout at death, which can help those policyholders who are diagnosed with terminal illness ensure their comfort and care.
Finally, many people like term life insurance because it can often be converted down the road into a permanent policy, without having to worry about insurability. This is a great feature for anyone who may have had a change in health that would prevent them to qualifying for a new life insurance policy after the term insurance has expired.
As with any type of policy, there are drawbacks. Unlike permanent policies, term policies don’t build cash value. They’re also not permanent. In other words, if you buy a 10 year term life insurance policy and you don’t convert it, then in 10 years, that protection ends.
**It should be noted that most term life insurance policies will not suddenly terminate after the contract length has expired. Typically what happens is the coverage turns into a expensive annual renewable term policy that will allow you to continue paying usually to age 90.
Any type of insurance must be chosen to fit your specific situation, so if the pros of term life insurance are ideal for you, let’s move on to choosing the best term life insurance length for your needs.
How to Choose Term Life Insurance Lengths
Among the choices to make about life insurance, this is one of the most important because it can have real impacts on your life. Term life insurance lengths not only influence policy premiums but also determine how long your affordable coverage will last.
There are a few elements to take into account when selecting the best of the available term life insurance lengths:
- Any debts you owe
- Any dependents who may require monetary support
We’re going to take a closer look at each one of these elements so that by the time you finish reading this guide, you’ll know how to choose from the offered term life insurance lengths.
Do you own a house, a car, or a boat? The costs of property do not go away if you should die. For that reason, it can be comforting to know that your loved ones won’t be forced to sell those assets right away. This is particularly important for your home.
If you own your home, you should consider not only the cost of your mortgage but also the cost of insurance and average home repairs. The point of life insurance is to provide for the loved ones you might someday leave behind.
What about other loans? Do you carry student loans? There are some types of education loans that are forgiven in the event the borrower passes, but others do not have such a provision. You don’t want to leave your children with tens of thousands of dollars to pay off.
Being ten years away from paying off student loans is different from being thirty years away. These types of borrowing situations can influence how long a term you purchase for your life insurance.
Speaking of those whom you love, if you care for any children or elderly, you’ll want to account for their years of dependency to come when choosing an appropriate term life insurance length. If your kids are already in high school, a shorter term length may do the trick–then you might want to lower the benefit after that.
However, if your children are toddlers, you’ll want a longer term life length as there are more years ahead in which they will need monetary support.
Let’s also not forget about your spouse. One of the biggest reason for the purchase of a life insurance policy is to replace loss income due to an unforeseen death.
Have you ever heard the expression that you can’t squeeze water from a stone? This means that you can only afford what you can afford. Unfortunately, we don’t have the ability to make money grow on trees. If we could do that, we wouldn’t need term life insurance at all!
The fact is the longer the term, the more expensive your policy will be. Think of it this way. If you are thirty years old and you buy a 10 year policy, that offers you protection until you’re forty. If you buy a 30 year policy, it will protect you until you’re sixty years old.
A person is much more likely to perish or experience health changes at older ages, therefore making a longer term life insurance length more costly than a 10 year term length.
Of course, should you buy the 10 year policy at age thirty, and then another 10 at age forty (which will be more expensive because you’ll be older), you might end up paying more than if you buy a 20 year policy at age thirty.
Because actuarial tables–the data that is used to calculate term life insurance rates–can be complex, the best way to determine which policies you can afford is to get quotes. If you determine that you need a policy that is 15 to 30 years in length, then you should get quotes for term life insurance lengths of 15, 20, 25, and 30 years.
Do you still have questions about what term length is right for you? That’s fine! We invite you to contact us so we can help you make this important decision.