If you are thinking of getting life insurance, you should think about how long you will need it for?
If you would like to get coverage for a specific time period, then your coverage will be temporary and as a result inexpensive. On the other hand, if you are interested in life insurance coverage that is more permanent: it will be a bit more expensive, but you will be covered for the rest of your life.
Term Life Insurance, how long should your coverage be?
As the name implies, term life insurance will only cover you for the stated term, not the rest of your life. You will have to decide how long you would like to have your life insurance policy by choosing the length of the term, based on your insurance coverage needs.
Choosing The Length of Your Term
There are several common lengths of term to choose from when picking a Term life insurance. The most popular ones are: 10-year term, 20-year term, and 30-year term. These are not the only terms that’s available to you. There are also terms such as 15, 25, 35 …and even a 40-year term.
10-Year Term – this is short term coverage, It’s useful for covering unplanned situations. For example, when covering an outstanding mortgage balance on your home or if you have some other kind of debts that will be outstanding for a few years.
Also, if you are a young person and you’re just starting out in life and you’re working with a limited budget. A good strategy would be to get a term policy and convert to a permanent policy when your finances improve. This way you have affordable coverage rather than none at all.
If you are business owners and you have a 10-year business loan and your lender requires life insurance to cover. Or, you might have a health condition that makes long-term coverage unaffordable, a 10-year term will be appropriate until your health improves and be able to get a better rate of premium.
20-Year Term – is great for young parents to provide coverage during their kid’s younger years until they are grown and have completed their postsecondary education. This is also good for people with less than twenty years on their outstanding mortgage.
30-Year Term – is typically the longest term available for most life insurance companies, a 30-year term policy will generally give you the longer-term coverage. This is normally a popular choice for newlyweds and young professionals, and also a great choice for the breadwinner of a family.
40-Year Term – there are only a few life insurance companies that offer level premium coverage for up to 40 years. This is a great option for people that requires long term coverage at an affordable rate.
Determine The Length of Required Coverage
To do this, you need to determine your reason for getting a term policy. Are you close to retirement and only need short term coverage? Or maybe you are younger and need income replacement for the next 30 years? Your reason for coverage will help determine the appropriate term coverage.
Top 3 ways to determine how long your term life insurance policy should be for
1. Cost – it’s better to have some coverage than nothing, purchase an inexpensive term life insurance policy that’s affordable. Don’t purchase a policy that could create financial difficulties for you, this could make you pay for a policy that will end up lapsing in a few years.
2. Age – How old will you be when your term life policy expires? Will you require another policy at the end of the term? Your age plays a big role in your rate of premium, as such, it’s important to determine your intentions now so there will be any surprises later. Upon renewal, the cost of a term policy goes up substantially.
3. Reason – Are you planning to cover short- or long-term insurance needs? Are you looking for a policy to cover your funeral and burial expenses? Or maybe you’re a millionaire and you need a policy to avoid estate taxes or leave an inheritance. There are many reasons for getting life insurance and they will help determine the term of your policy.
Other ways to determine how long your term life insurance policy should be
Mortgage – How much time is left until it’s paid off? Always make sure your policy covers the term of your mortgage, since this is often your biggest asset and liability.
Retirement – Will your life insurance policy be needed when you retire? If you’ve saved and invested for retirement, your life insurance needs will be different compared to if you did not.
What About Permanent Life Insurance?
Do you need life insurance to cover you for your entire life? If so, term life isn’t the answer. A permanent life insurance will provide your lifetime coverage, and you’ll have a few options to choose from.
Whole Life Insurance – this is a more expensive life insurance policy. Whole life will provide you with lifetime coverage at a premium. It’s also providing the opportunity for cash value growth, estate planning and is good for high-net-worth individuals.
Universal Life Insurance – This is a permanent life insurance policy that includes investments that grow over time. Universal life insurance might be right for you if you’re a business owner that would like to protect your business, and also a way to leave more money for your loved ones, or to grow your savings.
Take Charge – There are many things to think about when trying to determine how long to get life insurance. If term life is your insurance of choice, be very careful when choosing how long you want your term to be.