How to Pick a Term Life Insurance Policy

Rather than lasting your whole life, term life insurance is only valid for a specified amount of time. Because of this, it is cheaper than whole-life policies, making it a very popular option.

There are many different term life insurance policy lengths to choose from, and different ones meet different needs. The most common policies include 10-, 15-, 20-, or 30-year terms. How do you know which policy term is right for you? Use this guide to help you select the length that meets your requirements.

Coverage Amounts

Naturally, coverage amounts vary. However, the most common limits are:

• $250,000

• $500,000

• $750,000

• $1,000,000

The higher the coverage, the more expensive your premium will be. Always choose a coverage amount that would cover the expenses and debts you’re liable for, otherwise, your family could face a great burden if you pass away suddenly.

30-Year Term Length

In most cases, 30-year terms are the longest you can buy in a policy. Because of this, they are also the most expensive. In particular, 30-year terms are good for the following kinds of people:

• Newlyweds. As a newlywed, you’ll merge your finances with your partner. Since the average millennial has about $29,400 in student loans, a couple getting married could easily top $60,000 in combined debt. You’ll probably need a while to pay off these bills, so a 30-year term length is a good option. That way, if either of you dies unexpectedly, you won’t be dragged down by your expenses.

• New homeowners. Buying a home is an exciting milestone, but it also means you’re on the hook for a huge financial obligation. Because most mortgages last 30 years, it is a great idea to invest in a 30-year term life insurance policy at the same time. The average monthly mortgage payment in the United States is $1,029, which is a huge burden to throw on your family if you pass away. Having 30-year term life insurance protects them.

• Those with young children. According to research, one out of every 20 children under the age of 15 will lose one or both of their parents. If you have kids, a 30-year policy is a great way to provide for them in the event of the unthinkable. You want to make sure you have enough coverage until your children are grown and can provide for themselves.

20-Year Term Length

For many, a 20-year term is a popular option because of its hybrid of length and affordability. Premiums drop several dollars a month compared to 30-year policies, but you only lose 10 years of coverage. Usually, 20-year term lengths are the best option for:

• Those with young children. Either a 20-year or 30-year policy is appropriate if you have kids. With a 20-year policy, you won’t have coverage for as long, but it is still long enough to see your kids through high school and college.

• Those with debt. If you’re struggling with a lot of debt, a 20-year term policy makes the most sense. In the span of 20 years, you will likely pay off most of that debt, so the plan acts as a safety net in case you meet an early demise. Keep in mind that the average 35- to 44-year-old has $133,100 in debt, so choose a plan that offers the right amount of coverage.

• Those who are retiring in 20 years. Are you nearing retirement age? If so, a 20-year policy could be perfect. By the time you are retired, most of your debts should be paid off, so there is not a huge need to maintain your term life insurance policy past this point.

15-Year Term Length

A 15-year policy is even cheaper than a 20-year policy, making it a bargain option for many who need a shorter term. In particular, it’s a great deal for:

• Parents with older children. If your children aren’t newborns, you might not need a longer coverage term. If they are adolescents or teenagers, 15 years is more than enough to see them safely to adulthood.

• Children with older parents. You don’t just have to worry about your kids – you also need to keep your parents in mind. While your parents hopefully have their own retirement plans in place, if something goes wrong, you might need to support them. The average retirement costs $828,000, so don’t leave your parents to struggle with that cost all alone.

• People nearing retirement. Are you getting closer to retirement yourself? If so, you might be close to the age of financial independence. However, until you’re at that point, you could be a burden to your loved ones if you pass away. A 15-year policy protects them from any bills you leave behind.

10-Year Term Length

A 10-year term length is your cheapest term life insurance option. Many people don’t think coverage this short is worth it; however, it’s actually the perfect option for several kinds of people:

• Those struggling with their mortgage. Is your mortgage taking you longer to pay off than you expected? If so, your old term policy might not be long enough to cover the rest of your debt payments. Adding on a small 10-year policy could provide additional protection for your debts.

• Those nearing retirement. Again, if you’re close to retirement, a 10-year policy might be your best bet. The 10 years of protection gives you time to pay off your debt while increasing your retirement savings.

• Those currently living unhealthy lifestyles. If you smoke, have high cholesterol, or have high blood pressure, these health problems will drastically increase your life insurance premiums. Instead of committing to a long-term policy with a higher cost, choose a short 10-year policy while you work on improving your health. By the time it has expired, you can get lower premiums on a longer-term policy.

With a little thought into what length policy works best for your needs, you can choose a term life insurance plan that offers appropriate coverage at an affordable cost.