How long should my life insurance coverage last?

How to choose your life insurance term length.

Once you’ve decided that you want term life insurance instead of whole life, you have two more decisions to make: how much coverage you need and how long you want your term to last.

Determining coverage amount is a combination of how much coverage you need (for example, to pay of a certain loan or to pay for a child’s upbringing), how much you can afford (more coverage means higher premiums), and how much you will qualify for (10 to 12 times your salary is a commonly cited number, but it could be higher).

Deciding on term length is a similar equation: weighing the cost with what’s available for what you need.

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Choosing your life insurance term length

The “term length” is the policy’s duration. Most term life insurance policies last 10, 20 or 30 years, but many companies offer additional five- or 10-year increments, some up to 35 or 40 year terms.

For example, a 20-year term policy covers you for 20 years from date of purchase, as long as you keep paying the premiums. Likewise a 30-year term policy will cover you for 30 years. If you die during that time, your beneficiaries will receive a death benefit. If you die after that time, your beneficiaries won’t receive a benefit, which is another reason to extend your benefit: it extends your family’s protection.

Calculating your coverage length

To determine the ideal term length for your policy, you need to revisit the reason you’re buying the policy in the first place: to protect your family financially if something happens to you and ensure that an unexpected death does not financially burden the surviving members.

Some common examples:

  • If you just had a kid, you probably want a policy that is at least 25 years long (so: a 25- to 30-year term) since that’s how long you’ll need to provide for your child’s upbringing and college tuition.
  • If you’ve just bought a house, a 30-year term may be right for you, since that’s likely how long your mortgage is for. Even if you’ve taken out a 20-year mortgage, you may want a cushion in case you refinance and circumstances change.

Reasons to consider a longer a term length

1. Your life insurance rates are currently lower than they’ll ever be in the future

Your rates increase as you age and your health changes. New diagnoses, either for you or even your siblings or parents, can increase your rates in the future if you need to apply for a new policy. Plus, inflation and industry changes mean that you just can’t guess what rates will be 20 years in the future. The rates for a 50-year-old may look affordable now, but they may not be in 20 years.

2. Life happens

The math may work out now for you to be financially set once the shorter term expires, but there are many things that could happen that could mean your family would need protection beyond that term. Maybe you’ll have another kid, have to stop working, or end up taking care of your parents, for example.

3. If you need to, you can lower your coverage (and your premiums)

It’s possible that 20 years into a 30-year policy you no longer need such a large death benefit. At that point, you can lower the policy’s coverage amount, thus lowering your premiums, without going through underwriting again. This is a much cheaper option than reapplying, with elevated rates, at a later age. This article explains more about how to adjust your life insurance coverage.

How Policygenius can help you choose the right term length for you

Policygenius can help you decide on the right term length for you at each stage of your life insurance purchasing process.

To start, our life insurance calculator asks you a few questions about your financial responsibilities and assets to suggest a coverage amount and a coverage term. But these are just a starting point.

After you get life insurance quotes through Policygenius, you can use our quote tool to adjust term length and coverage amount and see how your rates change in real time.

And when you work with a Policygenius advisor to apply, we can pull even more specific figures for you based on your health class and personal circumstances.

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How term length affects cost

The longer the term length, the more the policy will cost in monthly premiums. The reason is that a longer term means that it’s more likely that the insurance company will have to pay the benefit during that term. Monthly premiums for a 30-year policy will be higher than a 20-year policy because the higher premiums for that last 10 years will be averaged into the rates.

The advantage of buying a longer term is that it locks in rates. That means that if you develop a serious illness during the course of the term, you rates won't increase. If you bought a shorter term and needed to apply for additional coverage later, a diagnosis could mean you’re uninsurable.

It’s important to find the sweet spot for term length that means you can still afford your premiums while ensuring that once your coverage expires, you will have built up enough resources so that you don’t need insurance anymore.

Sample rates: Standard health class

We pulled sample quotes for a woman with a standard health rating, which is common for people in average health. Read more about life insurance health classifications and how they’re set.

AGE$500,000, 10-YEAR TERM LIFE MONTHLY PREMIUM$500,000, 20-YEAR TERM LIFE MONTHLY PREMIUM$500,000, 30-YEAR TERM LIFE MONTHLY PREMIUM
20$22.13$30.10$43.86
30$22.65$31.39$49.88
40$31.32$45.88$77.36
50$63.94$99.76$181.85
60$136.70$250.65N/A

From the table, you can get an idea why choosing the right term length is so important. If you buy coverage young, say when you’re 20, your rates don’t change that much over the next decade. But if it turns out that you need more coverage later, your rates can be much higher just based on age. And if you’ve had common health changes like higher blood pressure, higher cholesterol, or weight gain, your health class could change, making your rates even higher.

As an example, let’s say you’re 30, in average health, and buying coverage to protect your family. By your calculations, in 20 years, at age 50, you should have enough saved to not need life insurance coverage anymore.

Based on these sample rates, your 20-year policy will be $31.39 per month. That is $7,534 ($31.39 x 12 x 20) over the life of the policy. The catch is that the policy will expire when you’re 50 years old. If your family will still be affected financially when you die at that time and you haven’t built up enough savings to leave them whole, you’ll still need insurance — and you’ll have to reapply.

If you take the rates from this chart, things don’t look so bad. If you're still in average health and getting a standard health classification, a new 10-year term policy to last you until age 60 would cost you $63.94 per month at today’s rates, That’s $7,673 ($63.94 x 12 x 10) for the 10-year term.

But in 20 years, this rate table will likely look very different, with higher numbers across the board, both due to inflation and the changing insurance industry. It’s also possible that when you reapply at 50 you’ll get a substandard health rating, or maybe that you’d be uninsurable altogether. You just don’t know what the future holds.

Alternatively, if you purchased a 30-year term policy at age 30, you will pay $49.88 per month, or $17,956 ($49.88 x 12 x 30) over the life of the policy.

It’s more expensive to pay for a longer term upfront, but the benefit is that it guarantees coverage until age 60. Increasing your term is is a way to lock-in rates and guarantee coverage, no matter what happens with your health.

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Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.