Here at IBUSA, we have found that the 20-year term life insurance policy has consistently remained one of the most popular options that our clients choose over the years. Popular because 20 years of coverage will generally be long enough to ensure that small children will have the protection that they need, as well as possibly cover the cost of an outstanding mortgage one might want to be covered as well.
Additionally, 20-year mortgages tend to be quite affordable, which is why it’s no wonder that these types of life insurance policies tend to have that “Goldilocks” feel to them: They aren’t too short or too long, and the price seems just right.
That said…
There are times when a 20-year term life insurance policy might not be the right policy for everyone, particularly for those applying for coverage in their 20s, 30s, or even mid-40s. This is why we wanted to take a moment and discuss some of the pros and cons of purchasing a 20-year term life insurance policy so that you might have a better idea if such a policy is right for you.
But, before we dive into all of that, let’s first take a look at some sample rates you might expect to see when applying for coverage so that you can get a general idea about what a 20-year term life insurance policy might cost.
Best 20-Year Term Life Insurance Rates
The following quotes are for 20-year term rates from companies that require an exam and also no medical exam life insurance. Either way, all quotes are from top-rated life insurance companies, are for informational purposes only, and must be qualified for.
OK, now that we have an idea about how much a 20 year term life insurance policy might cost, let’s address some of the most common questions we’re asked by those considering purchasing such a policy.
Questions such as:
- What is a 20 year term life insurance policy?
- Who should consider buying a 20 year term life insurance policy?
- What happens at the end of the 20 years if I’m still alive?
- What does the application process consist of?
- Can you apply for a 20 year term life insurance policy without taking a medical exam?
- What if I can’t qualify for a traditional 20-year term life insurance policy?
- What can I do to ensure that I buy the best 20-year term life insurance policy for me?
So, without further ado, let’s dive right in!
What is a 20 year term life insurance policy?
A 20-year term life insurance policy is a type of life insurance that provides coverage for a specified period of 20 years. It is a form of temporary life insurance, meaning that it does not accumulate cash value over time like permanent life insurance policies.
With a 20-year term policy, if the insured individual passes away during the 20-year period, the designated beneficiaries will receive a death benefit payout. The beneficiaries can use this payout to cover various expenses such as funeral costs, mortgage payments, education expenses, or any other financial obligations.
One of the key advantages…
Of a 20-year term life insurance policy is its affordability compared to permanent life insurance options. Premiums for term policies are typically lower because they only provide coverage for a specific time frame and do not offer additional features like cash value accumulation or investment components.
It’s important to note that once the 20-year term period expires, the policy will generally need to be renewed at a higher premium rate if the insured still wishes to maintain coverage. Alternatively, the policyholder can let the policy expire without receiving any benefits if they no longer require life insurance protection.
Who Should Consider Buying a 20-Year Term Life Insurance Policy?
New Parent
Probably the #1 reason people choose a 20 year term life insurance policy is because they are going to be a new parent.
After all, kids are going to be in the house for close to 20 years, so it makes sense to get life insurance in place for the same amount of time that your kids most need you to provide for them financially.
Income Protection
Income protection is another great reason to get a 20-year term policy. This is particularly true for someone in their mid-40s who plans on retiring in 20 years or so and wants to protect their income until that time.
Mortgage Protection
Some individuals purchase a 20-year term policy as a way to cover the full or partial cost of a mortgage in the event that they were to pass away. Clients choosing to do this want to make sure their loved ones would be able to keep their home in the event that they (the insured) passed away prematurely.
Offsetting pension benefits
Some clients may also choose to purchase a 20 year term life insurance policy in combination with a pension payment plan so that their surviving loved ones will be financially protected regardless of when the insured passes away.
What happens at the end of the 20 years if I’m still alive?
The coverage of a 20-year term life insurance policy expires after 20 years. If you are still alive at the end of the term, you will no longer have life insurance coverage under that policy. If you are still in need of life insurance coverage after the term of the policy has expired, you have several options:
Renew the policy:
Some 20 year term life insurance policies can be renewed for additional terms. You will generally have the option to renew the policy before it expires, and the premiums may be adjusted based on your age and health at the time of renewal.
We should point out, however, that the cost of renewal will likely be significantly higher than when you first applied 20 years earlier, AND the new policy will need to be renewed each and every year at what will likely be a higher price each and every year.
Purchase a new policy:
If you are still in need of life insurance coverage after the term of your current policy has expired, you can purchase a new policy. You may be able to purchase a new 20-year term policy or a different type of policy, such as a permanent life insurance policy.
Here again, it’s important to note that the price of your new life insurance policy will probably be much more expensive than your original 20-year term life insurance policy, given that you are now 20 years older than the first time you applied for coverage.
Plus…
This time around, your health may not be what it was 20 years ago, which means that you might not be able to qualify for the rate class you did last time. That is, of course, assuming that you haven’t been diagnosed with any significant pre-existing medical conditions that could prevent you from being able to qualify for coverage altogether.
Allow the policy to end:
If you no longer need life insurance coverage, you can choose to simply allow the policy to end.
What does the application process consist of?
The life insurance application process involves several steps, which may vary depending on the insurance company and the type of policy you are applying for. In general, you can expect the following steps to be part of the process:
- Gather information: You will need to provide information about yourself, including your age, gender, and health history. You may also need to provide information about your lifestyle, such as whether you smoke or engage in high-risk activities.
- Take a medical exam: Some life insurance policies require you to undergo a medical exam as part of the application process. This exam may include a blood and urine test and may be conducted by a medical professional.
- Submit the application: Once you have gathered the required information and taken any necessary medical exams, you will submit the application to the insurance company.
- Wait for a decision: The insurance company will review your application and consider the information you have provided, including your medical history and exam results. Based on this information, the company will decide whether to offer you coverage and, if so, at what terms.
- Review the offer: If the insurance company offers you coverage, you will receive a policy proposal or offer. It’s important to review the terms of the offer carefully to make sure you understand the coverage provided and any exclusions or limitations.
- Accept the offer: If you decide to accept the offer, you will sign the policy and pay the required premiums. Once you have done this, your coverage will become effective.
Can you apply for a 20 year term life insurance policy without taking a medical exam?
Yes, it is possible to apply for a 20 year term life insurance policy without taking a medical exam. Some insurance companies offer no medical exam term life insurance policies, which do not require you to undergo a medical exam as part of the application process. Instead, these policies typically require you to answer questions about your health and lifestyle, and the insurance company will assess your risk based on the information you provide.
No medical exam term life insurance policies may be a good option for those who prefer a quicker application process or who have health conditions that might make it difficult to qualify for a traditional term life insurance policy. However, it’s important to keep in mind that these policies may have higher premiums than traditional policies, as the insurance company is taking on more risk by not requiring a medical exam.
This is why, It’s a good idea to compare quotes from multiple insurance companies to see what options are available and to determine which policy best meets your needs and budget.
What if I can’t qualify for a traditional 20-year term life insurance policy?
If you are unable to qualify for a traditional 20-year term life insurance policy due to your health or other risk factors, there are other options available to you. Here are a few options to consider:
Guaranteed issue life insurance:
Guaranteed-issue life insurance policies do not require a medical exam or any health-related questions. These policies are generally available to anyone who is age 40 or older, and they typically have higher premiums and lower coverage amounts than other types of life insurance policies.
Accidental death Policy:
An accidental death policy is an insurance product that provides financial benefits to your beneficiaries if you die as the result of an accident. These policies may cover accidental deaths resulting from a variety of causes, such as car accidents, falls, or sports injuries.
Accidental death policies may be a good option for those who are concerned about the financial impact of accidental death on their loved ones or for those who have high-risk occupations or hobbies that increase the likelihood of accidental death and can’t qualify for traditional life insurance.
Accidental death policies typically have lower premiums than other types of life insurance policies, as the risk of accidental death is generally lower than the risk of death from other causes. However, it’s important to keep in mind that accidental death policies do not provide coverage for deaths that result from illness or natural causes.
At this point, we should mention that we here at IBUSA will usually only offer these types of policies when no other traditional option is available.
How To Qualify For These 20-Year Term Life Insurance Rates
The above 20-year term life insurance rates are for a healthy individual who qualifies at the best rate class. Some people may qualify for these top rates without having to take a life insurance medical exam. Only about 10% of applicants qualify for the top rates, with most people qualifying for standard or standard plus.
Life insurance health ratings include:
- Preferred Best or Preferred Plus
- Preferred
- Standard Plus
- Standard
- Substandard or Table Rated
- Preferred Tobacco
- Standard Tobacco
All the top life insurance companies use similar health ratings. However, not all the companies have the same underwriting criteria used to determine applicant’s health ratings. This is very important because if you have some health condition, a dangerous job, or a risky hobby, you need to apply to companies that cater to your unique health and lifestyle profile.
Further, some companies offer healthy credits, which can move you from a standard rate class to a preferred rate class, saving you a ton of money on your 20-year term life insurance premium payment.
Healthy Credits
Certain life insurance companies offer applicants healthy medical credits and healthy lifestyle credits. These bonus credits can raise your health rating from standard plus to preferred plus and save you thousands of dollars on your policy over your lifetime.
The key is knowing which company to apply with from the start so you can truly get the best 20-year term life insurance rates in the marketplace based on your unique health and lifestyle.
That is where IBUSA comes in. We can help get you the best shot at achieving the lowest 20-year term life insurance rates in the marketplace. Give us a call today to see what we can do for you.
Frequently Asked Questions
What is the coverage period of a 20-year term life insurance policy?
A 20-year term life insurance policy provides coverage for a period of 20 years from the date the policy is issued.
Can I renew the policy after the 20-year term expires?
Typically, term life insurance policies do not automatically renew after the term period ends. However, some insurance companies may offer the option to renew the policy at a higher premium rate.
What happens if I outlive the 20-year term?
If you outlive the 20-year term of the policy and you do not choose to renew it, the coverage will expire, and the policy will no longer provide any death benefit.
Can I convert a 20-year term policy to a permanent life insurance policy?
Many insurance companies offer the option to convert a 20-year term policy to a permanent life insurance policy during a specified conversion period. This allows you to switch to a policy that offers lifetime coverage and potential cash value accumulation.
How much coverage do I need with a 20-year term policy?
The amount of coverage you need depends on your individual circumstances, such as your financial obligations, income, and future needs. It’s advisable to consider factors like outstanding debts, mortgages, education expenses, and income replacement when determining the coverage amount.
Are the premiums fixed throughout the 20-year term?
With most 20-year term policies, the premiums remain fixed for the entire duration of the term. This means that your premium payments will not increase during the 20-year period.
Can I add additional riders to a 20-year term policy?
Yes, insurance companies often offer additional riders or optional features that can be added to a 20-year term policy for an extra cost. Examples of riders include critical illness riders, accidental death benefit riders, or disability income riders.
Is a medical exam required to qualify for a 20-year term policy?
The requirement for a medical exam can vary depending on the insurance company, the coverage amount, and the applicant’s age and health. In some cases, a medical exam may be necessary to determine your eligibility and premium rates.
Can I cancel a 20-year term policy before the term ends?
Yes, you can typically cancel a 20-year term policy at any time. However, it’s important to check with your insurance provider regarding any potential cancellation fees or refund policies.
Are the death benefit proceeds tax-free?
In most cases, the death benefit proceeds from a life insurance policy are received tax-free by the beneficiaries. However, it’s always advisable to consult with a tax professional to understand the specific tax implications in your jurisdiction.
Remember, it’s essential to consult with a qualified insurance professional or financial advisor to get personalized advice based on your specific needs and circumstances when considering a 20-year term life insurance policy.
