One of the main reasons why individuals will choose to purchase a term life insurance policy is because when compared to other types of life insurance policies, term insurance is typically the most affordable option.  Particularly when quoting 10 and 15-year term life policies.

This is why it’s not all that surprising that we frequently receive calls from individuals with 10-year and 15-year term life insurance policies that are set to expire, who are looking to either renew their current coverage or apply for a new policy.  Unfortunately, many of these clients face the harsh reality that renewing their coverage is too expensive, and/or they are unable to qualify for a new term life insurance policy due to their current health conditions.

With this in mind, we would like to address some of the key factors to consider when choosing the term length of your term life insurance policy and address some of the common questions and concerns expressed by our clients seeking to purchase such coverage.

Purpose of a term life insurance policy 

Term life insurance is a type of life insurance policy that provides coverage for a specified period of time, also known as the “term.” Its purpose is to provide financial protection for your loved ones in the event of your unexpected death. So, if you pass away during the term of the policy, your beneficiaries will receive a death benefit to help cover expenses such as funeral costs, outstanding debts, and living expenses.

One of the main advantages…

Of a term life insurance policy is its affordability compared to other types of life insurance policies. Your premium is based on factors such as age, health, coverage amount, and term length.  This means that you can purchase a large death benefit at a relatively low cost compared to other options. Another advantage of a term life insurance policy is its flexibility. You can choose the term length that best fits your needs, typically ranging from 10 to 30 years. This allows you to match the terms of the policy with the length of time that your loved ones will need financial support in the event of your death.

For example…

If you have young children who will need support until they reach adulthood, you might choose a 20-year term. On the other hand, if you have a mortgage that will be paid off within 10 years, you might choose a 10-year term. It’s important to remember that a term life insurance policy does not accumulate cash value like some other types of life insurance policies. This means that if you do not die during the policy’s term, the coverage will simply expire, and you will not receive any benefits. For this reason, term life insurance is typically recommended for individuals who are looking for affordable, temporary life insurance coverage.

So, to sum it up, a term life insurance policy is a useful way to provide financial protection for your loved ones for a specific duration. The key is determining the amount of coverage needed and the time that protection is required.

How you need it can help you determine how long you’ll need it for.

When it comes to choosing a life insurance policy, one of the most important decisions you will make is determining how much coverage you need. This decision can also help you determine the length of time you’ll need the coverage for.  Here’s how:

First, consider your financial obligations and the expenses your loved ones would need to cover in the event of your death. This includes any outstanding debts, such as mortgages or car loans, as well as your family’s living expenses, such as food, housing, and education. It’s important to consider these expenses and determine the amount of coverage that would be needed to help your loved ones meet these obligations in the event of your death.

Next, consider your income and the financial impact your death would have on your loved ones. If you are the primary breadwinner in your family, your death could result in a significant loss of income. In this case, you may want to consider purchasing a life insurance policy that would provide enough coverage to replace your income for a specified period of time, such as 10 to 20 years. This can help ensure that your loved ones are able to maintain their standard of living in the event of your death.

Once you have determined the amount of coverage you need, you can then consider the length of time you’ll need the coverage for. For example, if you have young children who will need support until they reach adulthood, you might choose a 20-year term. On the other hand, if you have a mortgage that will be paid off within 10 years, you might choose a 10-year term.

Consider your financial obligations, income, and the impact of your death on your loved ones to determine the amount of coverage that would be appropriate for your situation. This information can then help you determine the length of time you’ll need the coverage, ensuring that your loved ones are protected in the event of your unexpected death.

Insurance calculators can also help those struggling to determine how much coverage they should purchase.  Calculators like this one:

LIFE INSURANCE CALCULATOR

Adjust the sliders to fit your criteria. View your results below.

What’s your current age:

Expected college expenses for kids:

Burial costs:

Annual net income during retirement:

Number of years in retirement:

Money in investment accounts:

Annual investment contribution:

RESULTS

Based on your inputs, we recommend a life insurance policy with an approximate value of:

$0.00

Your total cost for

years of retirement at

per year is:

Assuming you retire at age

, you have

investing years left. Using a

annual rate of return for your investments, you're expected to earn a total of

.

Common Term Lengths to Consider

Before choosing the right term length for you, let’s examine some of the most common options available.

1. One-year term policies are the shortest term length available for term life insurance. They are typically the least expensive option and are ideal for those who need coverage for a very short period of time. They are commonly used by individuals who have a temporary need for coverage, such as a short-term loan.
2. Five-Year Term Five-year term policies are more popular than your one-year option. They are often used by individuals who also need coverage for a short period of time, as one sees with a loan or some other type of passing financial obligation like the end of a mortgage.
3. Ten-Year Term Ten-year term policies are a popular option for those who need coverage for a longer period of time. They provide more coverage than five-year term policies and are typically more affordable than longer-term policies. Ten-year term policies are often used by individuals who need coverage until their children are grown or until they reach retirement age. Ten-year term life insurance policies are also a way for people to “layer or ladder” coverage with other policies, providing additional coverage when it is most necessary.
4. Fifteen-Year Term Fifteen-year term policies provide a good balance between coverage and cost. They are ideal for those who need coverage for a longer period of time but do not want to pay the higher cost of a twenty or thirty-year term policy. Fifteen-year term policies are often used by individuals who need coverage until their children are grown or until they reach a certain age.
5. Twenty-Year Term Twenty-year term policies provide the most coverage of any term length and are ideal for those needing coverage for a longer period. They are typically more expensive than ten-year term policies but still less expensive than longer-term ones. Twenty-year term policies are often used by individuals who need coverage until their children are grown or until they reach retirement age.
6. Twenty-Five-Year Term Twenty-five-year term policies provide a good balance between coverage and cost. They are ideal for those who need coverage for a longer period of time but do not want to pay the higher cost of a thirty or forty-year term policy. Twenty-five-year term policies are often used by individuals who need coverage until their children are grown or until they reach retirement.
7. Thirty-Year Term Thirty-year term policies provide the most coverage of any term length and are ideal for those needing coverage for a longer period. They are typically the most expensive option among traditional term life insurance policies but are still less expensive than permanent life insurance policies. Thirty-year term policies are often used by individuals who need coverage until retirement age or remain in place until a mortgage is completely paid off.
8. Thirty-five-year term and Forty-Year term life insurance policies are less common options offered by some insurance companies. They are most commonly used as an attempt to provide the same coverage that a whole life insurance policy would, at ½ the cost. The cost savings occur because these policies will not accumulate a cash value, and it is still possible that you may outlive the coverage, unlike a whole life insurance policy.

Sample term life insurance rates

The following sample rates are from many of the top-rated life insurance companies. All rates are for informational purposes only, are subject to change, and must be qualified for.

10-Year Term Life Insurance Rates

20-Year Term Life Insurance Rates

30-Year Term Life Insurance Rates

40-Year Term Life Insurance Rates

Ultimately, the length of your term life insurance policy will depend upon your individual needs.  Sure, factors such as one’s health, age, and coverage amounts will play a role in determining cost, but cost alone shouldn’t be what guides your decision.  Instead, cost should be viewed as something that needs to be overcome so that you can obtain the right coverage for yourself and your family.

This is where working with an insurance brokerage like IBUSA, which has access to dozens of the best life insurance companies, can help.  With our help, we can simplify the process of finding the right life insurance policy for you and hopefully provide you with the affordable solution you are looking for.