So you’re thinking about getting a term life insurance policy. Smart move! Of course, now you have to decide how long you want your term life insurance to last. Although some people might benefit from a term life insurance policy that lasts for only 10 or 20 years, you’re here because you’re thinking about locking in that affordable term life insurance rate for a full 30 years.
Thirty years is a long time. It’s, like, the amount of time Marty McFly covered in Back to the Future (a movie that is well over thirty years old at this point, but we won’t dwell on that). It’s long enough to build a career, pay off a house or watch your kids grow up. In fact, in 30 years you could go from raising children to welcoming grandchildren.
What does that have to do with life insurance? Well, taking out a 30-year term life insurance policy can help you lock in affordable coverage rates right now and protect your loved ones financially no matter what the next thirty years might bring: homeownership, retirement, helping the kids pack up their hoverboards before you send them off to college.
Deciding to apply for a term life insurance policy is the first step in helping to ensure that the people you care about remain financially secure even in the worst-case scenario. The second step is choosing the right term length. After all, you want to make sure your family has coverage during the years they need it most — and selecting the right term length from the beginning can save you a lot of money down the road.
With that in mind, here’s what you need to know to decide whether a 30-year term life policy is right for you.
What is a term length and why is it important?
When you apply for a term life insurance policy, you get to decide how long you want your policy to last. Although individual term lengths can vary from one insurance policy to another, typical term lengths are 10, 15, 20, or 30 years. This means you can buy a life insurance policy that’ll protect you and your loved ones during a brief period in your lives, or sign up for the long haul.
Choosing the right life insurance term length for you is really about deciding how to cover your family during the years they’re likely to need it most. That could mean until your kids are out of college, for example, or your mortgage debt is paid off. The period of time in which that worst-case scenario could cause your loved ones not only grief, but also serious financial hardship.
So why does term length matter?
First, because selecting a long-term policy offers a longer period of peace of mind for yourself and your family. When a death is untimely, it can leave your loved ones in a tight spot financially, especially if you’re the primary breadwinner for your family. If they rely on your income to pay the mortgage, pay off credit card debt or meet day-to-day expenses, then a life insurance policy can be critical for preserving their financial health after your death.
Second, because taking out a life insurance policy that lasts for decades means that you don’t have to think about life insurance until your term runs out. You’re covered, and so are your loved ones.
How term length affects life insurance premiums
Term life insurance premium rates are based on a number of factors, including:
- Your age
- Your health
- The amount of coverage you’re taking out
- Your term length
Some people might assume that a 30-year term life insurance policy comes with smaller premium payments than, say, a 10-year term policy. But buying life insurance isn’t like taking out a loan or signing up for a subscription service. Your monthly payment doesn’t go down if you elect to sign up for a longer premium term period. Instead, it goes up.
This makes sense, if you think about it. Shorter term life insurance policies tend to have smaller premium payments than longer term policies, because … well, the odds of that worst-case scenario happening are going to increase over time. If you’re a 30-year-old adult in excellent health who wants coverage for the next 10 years, you’re going to pay less per month than you would if you wanted coverage for the next 30 years.
But — and this is important — getting a 30-year term life insurance policy now locks in your premium policy rate for the next thirty years. So if you apply when you’re 35 years old, you’ll be able to pay the same affordable premium every month until you turn 65.
That said, I know the higher price of a 30-year term policy just isn’t in the budget for everyone. Your job, when you are considering a term life insurance plan, is to find the best coverage for your unique financial needs.
Remember: the younger you are when you buy life insurance coverage, the lower your premium payments are likely to be — especially if you’re in good health. While we’re on the subject of health: as part of the underwriting process, you’ll need to answer questions about your health and may need to take a life insurance medical exam to provide evidence of insurability. Having a health condition, such as diabetes, could mean higher premium payments.
Some applicants may qualify for our InstantTerm process, in which people ages 18-59 seeking a $1 million death benefit or less may be able to finalize coverage without a medical exam, based on the information provided during the application process. Customers are notified once an app is submitted if they qualify to skip the exam. Keep in mind that it’s always very important to be honest in the application process. The issuance of the policy or payment of benefits may depend upon the answers given in the application and their truthfulness.
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Is a 30-year term length the best option?
A 30-year term policy is a popular choice because it provides peace of mind — and locks in your life insurance costs — for three full decades.
However, since there is a definite cost difference between a 30-year term and a shorter term life insurance policy, you have to consider whether a 30-year term policy is the best choice for your goals, needs and budget. You’ll also want to compare life insurance quotes to make sure you’re getting the best premium rates for the policy you need.
Here are some common financial scenarios in which a 30-year term life insurance policy could be the right choice.
“I have a 30-year mortgage.”
A 30-year term life insurance policy is a great option for families carrying — you guessed it — a 30-year mortgage. It’s also great for families and couples who have between 20 and 30 years to go on paying down their home loan.
On a monthly basis, most of us pay more toward housing costs than any other category of expense. If something should happen to you before the mortgage is paid off, your policy could help your family continue to make the monthly mortgage payments or help pay the entire balance in full.
This could allow your family to stay in the home after your death, which is probably important to your spouse and your children. Nobody wants to follow the worst-case scenario of a loved one’s death with the worst-case scenario of a foreclosure.
“I’m a newlywed.”
If you’re planning a wedding or returning from a honeymoon, getting life insurance coverage may be the last thing on your mind. But it’s an important step to consider if you want to increase your financial strength as a couple.
An online life insurance calculator will usually recommend a 30-year term policy for young, married individuals. Why? It’s likely you both rely on each other for some kind of financial contribution — whether for large bills like your mortgage or for smaller day-to-day expenses. If you and your partner are in your early 30s, a 30-year term can protect both of you until your early 60s, a time when many people hope to be winding down debt and closing in on retirement plans.
Also, in case you’re curious: both spouses need life insurance coverage. Even if one of you earns significantly more than the other, and even if one of you plans to stay at home with your children. A recent Haven Life study showed that there is a significant life insurance gender gap, with men valuing their lives nearly twice as much as women (in terms of coverage amounts). Let’s close that gap and help everyone get the life insurance coverage they and their families need, okay?
“I’m the primary breadwinner.”
Being the primary breadwinner is a big responsibility. Even if your partner brings in an additional source of income, your family likely relies on your income for their overall financial well-being. For young families, a 30-year term policy can be an ideal choice to help protect your income until your children are adults and your partner is at or near retirement.
By the way, even if your spouse is a stay-at-home parent and doesn’t earn a salary, he or she probably still needs life insurance. If something were to happen to your spouse, you might need to pay extra day care or after-school-care costs — or even hire a nanny or housekeeper to help run the household so you can continue earning an income to pay the bills.
“I have a special needs child.”
While some parents’ needs can be met with a 20-year term length — which will often cover their family until the kids are in college — parents with a special needs child should consider longer coverage. Depending on the nature of your child’s needs, it’s possible that their health will require you to care for them indefinitely.
Term life insurance offers an affordable way to help financially protect your family while you’re busy saving away for emergencies, retirement and other financial needs. For parents with a special needs child who may need lifelong care, a 30-year term buys you more time to set up a financial plan for your child’s future.
“I have substantial debt.”
Although housing and family obligations make up the bulk of most family’s monthly expenses, don’t forget to factor in other debts when deciding on a term length. Some debts can be forgiven after you die, including federal student loans. However, private student loans and other unsecured debts are not typically forgiven. Those financial obligations may very well be left to your cosigner or spouse if something happens to you.
Substantial student loan debts can follow you for years or decades, especially if you’re only paying the minimum amount on your debt each month. Make sure, no matter which term length you choose, that your life insurance policy lasts until those debts are expected to be paid off.
Aside from student loans, you may also be carrying credit card debt, a car loan, personal loans or business debt. Like student loans, debts cosigned by your spouse would become their responsibility upon your death. If you live in a community property state, debts incurred during the marriage — even if they’re in one spouse’s name only — may be passed on to the surviving spouse when one of you passes away.
Even if you have a solid plan in place for paying off your debt, life might derail your schedule. A 30-year term policy can offer a long enough window for you to resolve any outstanding debts, with the reassurance that money would be available to repay them if needed.
How much does a 30-year term life insurance policy cost?
Now that you’ve seen how a 30-year term life insurance policy can provide both you and your loved ones with financial security and peace of mind, let’s take a closer look at those premium rates.
Here are some sample Haven Term policy monthly rates for adults in excellent health at different ages. Each of these premiums reflects a 30-year term life insurance policy.
|Source: Haven Life|
As you can see, age matters for calculating the cost of premium payments. If you’re young and in good or excellent health, you can expect to pay less for term life insurance coverage overall — and knowing that you have a longer period of coverage can be much more valuable than any cost savings you could realize by going with a shorter term.
Is 30-year term life insurance right for you?
If you’re already thinking about buying life insurance, here’s what you should keep in mind about policy term lengths. Although a 30-year term life insurance policy might not be the best choice for everybody, it provides a “better safe than sorry” length of protection that can last until the kids are adults, the mortgage is paid off and you and your spouse are enjoying retired life. A 30-year term policy also gives you many, many years with your affordable life insurance coverage in place so you can focus on other things besides insurance, like building a financial safety net that many of us don’t have in our 20s, 30s and 40s.
No matter what policy you choose, having life insurance in place is an important part of your overall financial plan. You’re already taking a step in the right direction to financially protect the people you love most — so keep going. Use an online life insurance calculator to determine how much coverage your family might need. Ask yourself what your loved ones might need financially over the next thirty years, and what costs they might incur if you were suddenly to disappear from the picture. Then apply for a life insurance policy that can help your family cover those costs no matter what the future might bring.
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Nicole Dieker is a full-time freelance writer. Her work regularly appears on Bankrate, Lifehacker, The Write Life and numerous other sites. She is the author of Frugal and the Beast: And Other Financial Fairy Tales.
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