What is 10 pay life insurance & how does it work?

10 pay life insurance is a whole life insurance policy with a unique payment schedule — you pay premiums for only 10 years and you get lifelong coverage.

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Tory CrowleyAssociate Editor & Licensed Life Insurance AgentTory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

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Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Maria FilindrasMaria FilindrasFinancial AdvisorMaria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated|6 min read

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10 pay life insurance is a type of whole life insurance that lasts for the rest of your life. This type of policy also has a cash value account that grows over time.

What makes 10 pay unique is that you only pay premiums for 10 years. This is called a limited pay policy. Once your policy is fully paid up, you won’t have any more costs, but your life insurance will last until you die.

Key takeaways

  • 10 pay life insurance is a type of limited pay permanent life insurance. The death benefit will last your whole life, but you’ll only have to make payments for the first 10 years. 

  • Over the course of your life, you’ll pay about the same in premiums with a 10 pay policy or a whole life policy. But with a 10 pay policy, each premium will be more expensive. 

  • You should only get a 10 pay policy if you feel confident that you can make your payments. If your policy lapses, you’ll lose the death benefit and cash value.

Ready to shop for life insurance?

What is 10 pay life insurance?

10 pay life insurance is a form of whole life insurance — a type of permanent coverage that doesn’t expire and offers a guaranteed death benefit as well as a cash value component that will grow interest over time. Unlike most whole life policies, which require you to pay premiums for the rest of your life, 10 pay life insurance only requires you to pay premiums for 10 years. 

Whole life insurance is usually a good option if you’re looking to use life insurance to diversify your investment portfolio or if you have long-term financial obligations or coverage needs, like dependents who require lifelong care. If you’re already maximizing your contributions to tax-advantaged accounts like a Roth IRA or a 401(k) and are seeking another investment option, whole life insurance might work for you.

With a 10 pay whole life insurance policy, your coverage will begin right away, and you’ll only need to make premium payments for 10 years. After that, the policy will remain in effect for the rest of your life and you won’t have to make any additional payments.

10 pay life insurance vs. traditional whole life insurance

The biggest difference between 10 pay life insurance and traditional whole life insurance is how you pay the premiums. With the 10 pay policy, you’ll only pay premiums for the first 10 years that the policy is active. This is also known as a limited pay policy.

With a traditional whole life policy, you’ll have to make premium payments for the rest of your life to keep the policy active. Because the premium payments are spread out over your entire lifetime, each traditional whole life premium is usually much cheaper than a 10 pay life insurance premium. 

“The difference [between traditional whole life and 10 pay] is in how long you’re paying the premiums and the premium amounts,” says Alex Lozano, Certified Financial Planner at Lozano Group Wealth Management, with more than 12 years experience as a financial planner. “That’s the crux of what it comes down to.”

Both types of policies offer the same benefits. As long as you make your payments, you’ll be entitled to the death benefit your whole life — and the accumulation of cash value. 

Comparing 10 pay life insurance vs. traditional whole life insurance

10 pay life insurance

Traditional whole life insurance

Coverage duration

For life

For life

Payment period

10 years

For life

Premiums

Higher, but for 10 years

Lower, but for life

Cash value

Grows as you pay premiums and with interest, higher in the beginning

Grows as you pay premiums and with interest, lower in the beginning

How cash value in a 10 pay life policy works

Both 10 pay and traditional whole life policies have cash value. It will grow as you make payments and will increase with interest. As an added benefit, you’ll be able to take out loans against this cash value. But knowing which policy will yield a better cash value for you isn’t straightforward.

With a 10 pay policy, your premiums are set and you’ll likely live the full 10 years and make all your premium payments. Since part of your premium will go toward your cash value, you can estimate pretty closely what the cash value on your policy will be.

With a traditional whole life policy, the amount of premiums you pay and the cash value you accumulate will heavily depend on when you die. The longer you live, the more premiums you’ll pay, and the higher your cash value will be.

Example of 10 pay life insurance

Let’s say you apply for whole life insurance when you’re 50 years old. When you apply, the insurer will calculate your life expectancy in order to set your rates — in other words, how much you’ll pay for your policy.

If you don’t smoke and have no health issues, the insurance company could reasonably expect you to live to age 80 and offer you its best rates. 

If you get a 10 pay policy, you’ll pay premiums for the first 10 years. Your cash value will be higher than a similar traditional whole life policy in the beginning, but once the 10 years end, you’ll stop contributing to the cash value and rely only on interest to keep increasing it.

On the other hand, if you get a traditional whole life policy, during the first 10 years, you’ll pay lower premiums and contribute less to the cash value. But because you’ll continue paying premiums for the rest of your life, you could end up contributing more to the cash value over the course of your lifetime — especially if you live longer than the insurance company’s estimation.

However, neither type of policy has significantly greater cash value potential than the other, so it’s not a crucial factor to consider when choosing between both. 

Ready to shop for life insurance?

How does 10 pay life insurance work?

When you get a 10 pay policy, your coverage will begin right away. To keep the policy active, you’ll have to make premium payments for the first 10 years that the policy is active.

After that, your policy will last for the rest of your life and you won’t have to make any additional payments. “A limited pay policy essentially has an accelerated payment,” Lozano says. “You can tailor your insurance to fit your needs in terms of the premium amount. You want it to be paid for by the time you retire.”

The right choice for you will depend on your individual situation. “If it puts a burden on your expenses, then it’s too much,” Lozano says.

Whole life policies — including 10 pay policies – usually include a cash value component, which you’ll be able to take a loan against once enough value has been built up.

In a 10 pay policy, your cash value will grow faster because a portion of the premiums you pay goes toward the cash value — and the premiums for a 10 pay policy will be higher than those for a traditional whole life policy. 

How much does 10 pay life insurance cost?

A 30-year-old non-smoking male with no health issues could get a 10 pay life insurance policy with a $500,000 payout for $2,192 per month for 10 years, whereas a 30-year-old non-smoking female could expect to pay $2,327 per month over the same period of time for the same policy. 

10 pay life insurance rates

Age

Gender

$500,000 coverage amount

$1 million coverage amount 

$10 million coverage amount 

20

Female

$1,793

$3,585

$35,853

Male

$1,920

$3,840

$38,402

30

Female

$2,192

$4,383

$43,831

Male

$2,327

$4,654

$46,536

40

Female

$2,659

$5,317

$53,174

Male

$2,829

$5,658

$56,576

50

Female

$3,245

$6,490

$64,902

Male

$3,422

$6,844

$68,443

60

Female

$4,027

$8,054

$80,536

Male

$4,257

$8,514

$85,138

Collapse table

Methodology: Sample monthly rates are calculated for male and female non-smokers at a Preferred Plus health classification obtaining $250,000, $500,000, $1,000,000, and $10,000,000 10 pay whole life insurance policies offered through MassMutual. Rates may vary by insurer, term, coverage amount, health class, and state. Not all policies available in all states. Rate illustration valid as of 01/01/2024.

Your rates will depend on your age, gender, overall health profile, and the type of policy you’re buying. If you want to get a personalized quote for your specific situation, you can connect with a Policygenius agent. At Policygenius, our experts are licensed in all 50 states and can walk you through the entire life insurance buying process while offering transparent, unbiased advice.

Benefits of 10 pay life insurance

  • Guaranteed level premiums. With a 10 pay policy, you know exactly what your premiums will be and how long they’ll last.

  • Guaranteed lifetime coverage. As long as you make all your premium payments on schedule, you’ll enjoy the peace of mind of securing the death benefit. You won’t lose this benefit unless you cancel or cash out your policy.

  • Tax-deferred cash value accumulation. A 10 pay policy will quickly develop cash value. The cash value associated with your policy will grow with interest, and you won’t be responsible to pay taxes on any gains until you cash out the policy — but whole life policies with a more traditional payment structure also offer this benefit.

  • Policy dividends. Some 10 pay policies offer dividends, so over time you could receive funds from the insurance company. If you’re eligible to receive these funds, you can use them to help pay your premiums, take them as cash, or leave the money with your insurer to accumulate more interest, like a high yield savings account. But yet again, some whole life policies with more standard payment schedules may also offer dividends.

  • Living benefits. Most 10 pay policies come with living benefits. With living benefits, you’ll be eligible to receive a portion of the death benefit while you’re still living. To do this, you’ll have to experience a qualifying event like being diagnosed with a terminal illness. 

Drawbacks of 10 pay life insurance

  • Pricey premiums. Whole life insurance is already significantly more expensive than term life, but 10 pay’s unique payment structure means that the premiums you’ll pay will be even higher — you’ll need a lot of cash up front to cover the full cost of your policy. 

  • Higher chances to miss a payment. Keeping up with payments from a 10 pay policy might be harder due to its excessive cost — and if you fail to keep your policy in good standing, you’ll lose your coverage. 

  • Limited cash value potential. With a traditional whole life policy, you’ll make payments and build up the cash value for the rest of your life — not just over a set period. If you live longer than expected, you could pay more in premiums but also build up a bigger cash value than you would with a 10 pay policy.

Who is 10 pay life insurance for?

10 pay is best for people who need the benefits of whole life insurance and can afford the higher premiums of a 10 pay policy. 

Whole life insurance can be beneficial for you if: 

  • You need a lifelong death benefit. 

  • You have an adult dependent.

  • You can benefit from having a cash value account. 

  • A whole life policy can help you handle estate taxes. 

Ready to shop for term life insurance?

How to buy 10 pay life insurance

If you’re considering 10 pay life insurance, the first thing you should do is connect with a licensed insurance broker. Policygenius has a team of agents ready to answer your questions and help you get the best policy available to meet your financial needs.

Once you decide what type of policy you need, your agent will help you complete the required application documents and guide you through the process to get an offer back from the insurance company.

Here are the steps:

  • Connect with a Policygenius agent to get started on your application, get quotes, and find the best company for you based on your profile.

  • Apply for life insurance. Your agent will walk you through the application process and let you know if you’ll have to take a medical exam.

  • Go through underwriting, which is the process during which the life insurance company will evaluate your application details, health information, and lifestyle to determine how much you’ll pay for your policy.

  • Sign your policy and pay your first premium. After underwriting, the insurance company will extend you a final offer, which is when you’ll know your final rate. You’ll then sign your policy and pay your first premium for your coverage to be active.

Alternatives to 10 pay life insurance

Depending on your coverage needs and budget, these types of life insurance might be a better fit than a 10 pay policy.

  • Traditional whole life insurance offers the same benefits of a 10 pay policy, but the payment schedule is different. With a traditional whole life policy, you’ll be making payments for the rest of your life, but they’ll be lower than what you could expect to pay with a 10 pay policy.

  • 20 pay life insurance is another limited pay option, but instead of paying your policy in full over a decade, you would do so over 20 years. Your premiums would be half as cheap — or even cheaper — than with a 10 pay policy, and you wouldn’t have to pay premiums for the rest of your life.

  • Term life insurance is the most affordable type of life insurance in almost every situation. It only lasts as long as you need it and doesn’t have any complex tax restrictions and regulations. It doesn’t accumulate a cash value, but if you’re just considering life insurance for income replacement to protect your loved ones in your absence, term life insurance may be your best bet.

  • Final expense life insurance offers a small amount of coverage to help with end-of-life and funeral expenses — and its premiums are comparatively lower than a 10 pay policy’s, too. If all you need is a policy to cover funeral costs, final expense insurance might be right for you.

→ Learn about the main differences between term and whole life insurance 

Author

Tory Crowley is an associate life insurance and annuities editor and a licensed insurance agent at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

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