You should have life insurance long enough to match your biggest financial budgets and future plans. Whether you purchase the life policy to cover your mortgage, bridge the gap until retirement, or for your child’s education, it should last just long enough to protect what is very important to you.
In this article, we’ll talk about everything you need to know about life insurance term lengths and how to choose the right term length for your policy.
How Long is Term Life Insurance?
Term life insurance typically comes in 10, 20, or 30-year options, but you can also find terms ranging from just one year to 40 years. Many people don’t have life insurance because they’re unsure about their options, so remember you can tailor your term length to fit your needs.
What Are the Different Term Lengths?
The following is a quick guide to term lengths for life insurance. It contains the different life insurance term length explanations.
- Annual Renewable: Covers you for one year at a time, with the option to renew each year. Premiums go up each time you renew, so it can be pricier over time. It’s good for those looking to improve their health before switching to a more affordable plan.
- 5-Year Term: This is less common but useful for short-term needs, like covering a specific loan or expense.
- 10-Year Term: Ideal for older adults who need coverage for a shorter period, especially if they don’t have dependents like young children.
- 20-Year Term: The most popular choice. Great for families with young kids or those who need coverage while paying off long-term expenses.
- 30-Year Term: Suited for long-term needs, such as a mortgage or raising young children.
There are also some less common terms, like 15, 25, and 40 years, that you might find depending on the insurer.
How to Choose the Right Term Length
To pick the right term length for your life insurance, it is advisable that you consider these three things:
- Mortgage Duration: Match your policy length with how long you have left on your mortgage. You don’t want your coverage to end before your mortgage is paid off.
- Children’s Independence: Think about when your kids will be financially independent. If you plan to support them through college, choose a term that lasts until they’re fully on their own.
- Retirement Timeline: Once you’re retired and relying on savings, you might not need as much life insurance. Choose a term that covers you until retirement or until major expenses, like your mortgage and kids’ education, are done.
Why Should You Consider a Longer-Term Length?
Choosing a longer term for your life insurance might be a smart move for a few reasons:
• Lock in lower rates
Life insurance costs go up as you get older, but your rate stays the same once you buy a policy. Getting a 30-year term now can be cheaper than buying a shorter term and then another policy later on.
• Be prepared for changes
If your financial situation shifts, such as taking on new debts, having more children than planned, or caring for aging parents, a longer term ensures your coverage adapts to these changes.
• Easier adjustments
If your situation changes, you might be able to reduce the amount of your coverage without needing to purchase a new policy or undergo a medical exam. Increasing coverage later usually means higher costs and a new medical checkup.
When Should I Consider A Shorter Life Insurance Term Length?
A shorter term for your life insurance might be the best decision for you in some situations.
- Near Retirement: If you’re close to retiring, a 10-year term might be enough to cover your final working years and support your loved ones until you retire.
- Kids Almost Independent: If your kids are teens or young adults, you might only need coverage for a few more years until they’re fully self-sufficient.
- Debts Almost Gone: If you’re close to paying off major debts, like a mortgage, a shorter policy can cover you just until those debts are cleared, rather than a longer term you might not need.
Just as I have mentioned, it is advisable that you go for a life insurance term that fits your biggest financial budgets and plans. Whether it is covering your mortgage, supporting your kid’s education, or bridging the gap until retirement, your policy should last just long enough to protect what matters to you the most.
