With a term policy, your coverage will expire after a certain number of years, and you don’t want to be caught off-guard with your coverage expiring before you are ready for it to do so.
Generally, term lengths are for 10, 20 and 30 years, and you may be wondering what factors to consider when selecting a term.
Do You Have Additional Coverage?
One important factor to consider is if you have additional coverage. Many people will purchase a 10 or 20 year term life insurance policy to supplement a whole life policy. A whole life policy may never expire, and it may accumulate cash value. Because of this, it may provide the insured with the ability to pass a legacy on to heirs and to save for retirement. In addition, it may provide a base amount of benefits that beneficiaries may receive. A 20 year term life insurance policy, for example, may be purchased when the kids are first born, and it may provide extra coverage for the family until debts are paid off, the kids are at least grown and in college and other milestones have been reached. For those who do not have additional coverage, however, erring on the safe side and purchasing a longer term policy may be more advisable. This will prevent you from being under-insured or from paying a higher premium by purchasing a new policy later in life.
Here are some example quotes for a 20 year life insurance policy.
|20 Year Policy|
|20 Year Policy|
Where Will You Be?
Another factor to consider is where will you be when the term life policy expires. If you are just starting a family and plan to have more children in the coming years, a 10-year term life insurance policy may expire when the oldest child is 10 years of age, and this may not be ideal. Even if there are no plans to have kids or the kids are already grown, consider what the state of your finances will be in 10 years or 20 years. Will your spouse be financially secure and able to retire comfortably if you pass away after the coverage has expired? If the lack of coverage at the end of the term length may cause hardship for your beneficiaries, a longer term policy may be needed.
How Much Will Insurance Cost Later?
If your term life insurance policy expires before you are ready for it to, it may not be the end of the world. After all, you may be able to simply purchase another term life policy. However, it is important to note that life insurance generally will become more expensive with each year that you get older. Furthermore, your health may decline between now and then, and this can also affect the cost of insurance. It may be more affordable in the long run to opt for a 20 year term life insurance policy over a 10-year policy or a 30-year policy over a 20-year policy.
Selecting the type of life insurance to purchase as well as the amount of coverage can be challenging. With whole life policies coupled with various term lengths for a term life policy, you may easily become confused about options and caught up in the what-if scenarios. The fact is that buying life insurance should provide you with a certain level of comfort and peace of mind. When you have adequate coverage in place, you can rest easy knowing that your family is well-provided for even if you do pass away earlier in life.