Term life insurance gives owners a lot of flexibility regarding how ,many years that the coverage is guaranteed to last for. On the shortest end of the spectrum, level term policies are available starting at 5 years in length, and annually renewable policies can be used for even shorter periods of time. On the longer end, there are level premium policies available for 30 to 40 years (depending upon the company) and increasing term policies are available until age 100 (or later). Permanent forms of life insurance such as whole life are available no matter how long you live!
Choosing a life insurance with the right length of time can be critical. You want to make sure that your coverage lasts at least as long as you need it, because running out of coverage leaves your families financial security in jeopardy. It is crucial to make sure that you have the right length of coverage when you first buy life insurance because a change in health may render you un-insurable in the future. How do you know what the right length of term life insurance is?
The Term Policy Lengths That Most Companies Offer
These are the most common length of level premium term life insurance policies offered by companies.
- 5 years
- 10 years
- 15 years
- 20 years
- 30 years
- 40 years (some companies)
Most companies also offer increasing premium term life insurance policies which last (as long as you make premium payments) until age 85, 90, 95, 100 or even older. Read on for help determining how long you may need coverage to last. For help determining the amount of coverage you need, please see our life insurance needs calculator.
Term Can Be Cancelled Without Cost
Keep in mind that term life insurance can be cancelled without costs or charges at any point in time. It is much safer to have a policy which will last for a longer period of time than you need, and cancel the policy at the appropriate time, than it is to have coverage end while you still need protection. Longer term policies usually are slightly more expensive than shorter term policies, but the rise in price may not be substantial. This is why it is important to compare life insurance companies, types of policies, and lengths of policies before you purchase insurance.
How Long Will Your Mortgage Last?
Many people buy life insurance at the same time that they buy a house. This ensures that if something happens to an income earning member of the family, the mortgage can be paid off with the life insurance proceeds. This secures a home for the remaining family members, and the amount of money it will take to keep a home is a crucial minimum requirement that your life insurance should at least provide in coverage.
Matching the length of term policy with the length of your mortgage can be a good measure for how long your life insurance should last. Most mortgages are 30 years when they are first lent, and 30 year term life insurance policies are readily available. This is not the only factor that you should take into account when you are considering how long life insurance should last though.
How Long Until Your Estimated Retirement?
Matching your life insurance coverage time frame until your estimated retirement date makes sense. Typically retirement marks the time when someone has earned all the money that they will earn during their lifetime. Hypothetically, you should have saved enough money for your family to survive on through your entire retirement. If your life insurance ends as retirement begins, your savings should provide enough money for your family to maintain their lifestyle into retirement.
In reality, many people do not have enough in savings to last through retirement. You also need to account for what spousal benefits are for social security, and any pensions that you may have, as this income may disappear. If you think you may need life insurance into retirement, make sure that you plan accordingly.
How Long Until Your Children Go To College Or Become Independent?
Many people purchase life insurance to secure a child’s college education, or to make sure that a child is provided for until they are independent. If you feel that your spouse is capable of providing for themselves if something happens to you, but you want to make sure that your children are financially secure, you will want to match the length of your policy with the amount of time until you feel confident that any children will be secure by their own accord.
Keep in mind that college prices and living expenses increase over time, so if you are funding a college education make sure that you purchase more than enough life insurance to cover all costs at today’s prices. Also you may want to provide coverage beyond a child’s 18th birthday (which is traditionally when a child is considered independent) as this cultural norm is mostly outdated today and many children need financial support well into their 20’s.
Do You Have Other Factors In Your Life Affecting Your Coverage Length?
Always keep in mind any other factors or life changes which could affect your need for life insurance coverage. You may have other forms of debt besides a mortgage for which life insurance will need to account for. Your spouse may have an expensive move or lifestyle change planned in the future, which they are still likely to partake even if you have passed away. You may want to leave your children an inheritance, but you want to make sure that all of your money isn’t used by your spouse for living expenses if you pass away. Whatever extraneous factors may exist in your life, make sure that they are accounted for until a time when they are no longer relevant.
If You Are Not Certain, Consider Increasing Premium Term
Increasing premium term life insurance policies are a great solution for someone looking for the flexibility to keep their coverage in force for as long as they want, combined with the affordability of term life insurance. These are also known as annually renewable term life insurance policies. Increasing premium policies have premium structures in which the cost of the policy rises slightly each year, but as long as premium payments are made a life insurance company must provide coverage until a specified age. An illustration will show an estimate (and upper limit) of costs throughout each year of the policy.
Typically these policies can stay in force until age 90 or even much later (some policies today may even be guaranteed until age 115 or later). While the later years of the policy typically become a bit expensive, if you do not know how long you need a term life insurance policy for this can provide an excellent option. Coverage is very affordable for most people well into retirement. While the policy does expire without value (term life insurance has no cash value) the affordability and flexibility is very valuable to clients.
Don’t Dismiss Permanent Life Insurance
Because life changes fast, and you never know what needs your family may have in the future, you may want to consider some permanent insurance such as whole life insurance. You are allowed to own multiple life insurance policies at the same time, so purchasing a smaller permanent policy in conjunction with a larger term life insurance policy is a strategy that many people employ. The purpose of life insurance is primarily to provide financial security for survivors. Permanent life insurance guarantees that no matter when you pass away or what life changes may have occurred during the time that you own your life insurance policy, there will be some degree of financial security provided to your children, spouse, or any other dependents.
