When you’re just getting married or having a child, the decision to purchase term life insurance is easy. You know you need financial protection, and you know you need it for a long time. But as you get closer to your financial goals, the question gets a little more nuanced. Do you still need life insurance coverage? And, if so, how much is enough?
10-year term life insurance policies can be a great fit for those who just need to bridge the gap. These individuals know they need coverage to protect their loved ones today, but know they won’t need it far into the future. And, choosing the right length instead of just opting for a more extended, potentially unnecessary policy can save you money in the long run.
Why do you need life insurance?
Life insurance helps financially protect your family from the unexpected.
Maybe you and your partner want to put your kids through college. Or retire in an RV to travel the country. Maybe you and your partner value one-on-one care for your children and choose to have one parent stay home.
Whatever your financial goals, your income is what helps you get there. If you die, not only does your family lose a loved one, but they also lose the ability to achieve the goals you set together.
A life insurance policy payout can’t ease the emotional burden of your death, but it can help provide a financial safety net during a difficult time. The peace of mind from having a financial safety net in place for your family cannot be overstated.
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What is a life insurance policy’s term length?
Term life insurance offers coverage for a set period: Typically, 10, 15, 20, or 30 years. The policy pays out the coverage amount to your beneficiaries if you pass away within that time period. At the end of the term, the policy ends and you are no longer covered, unless you’ve chosen to continue your coverage (a higher premium would apply). Choosing the right term length will help financially protect your family during the years they need it most.
The amount of coverage and term length you choose will have a direct effect on what your monthly or yearly premium will be. And you should select that coverage amount and term length based on your family’s needs and financial dependences (such as a mortgage or student debt or future college tuition for the kids).
So, with that said, what type of situation would be best served by a 10-year term length period? Well, let’s find out.
Who might need a 10-year term length?
Your unique financial situation will determine what amount of term life insurance you should buy. Factors like the age of your kids, how long you have left on your mortgage, and how many years until you plan to retire will all impact the recommended term length. (Tip: a life insurance calculator can do this math for you.)
If one or more of the following statements describes you, a 10-year term length may be a good choice for you:
“I have middle school aged kids”
Many parents hope to support their kids into young adulthood or pay for a college education. If your youngest is 10- to 15-years-old, you’ve got about 10 years until his or her college graduation (hopefully). In that case, a policy with a 10-year term might suit you just fine.
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“I have less than 10 years to go on my mortgage”
If you have less than 10 years to go on your mortgage, choosing a 10-year term length could help your partner pay the mortgage if you were to pass away. This way, should the unexpected happen, your family would have less to worry about during such a difficult time.
“I’m retiring within 5 or 10 years”
In some cases, a life insurance policy becomes much less important once you’re no longer supporting a family or paying off debts with your income. If your children are financially independent and your partner could live comfortably off savings and his or her own Social Security or other retirement income, a life insurance policy term longer than 10 years might not be necessary. (There are, however, situations in which carrying a policy into retirement could make sense).
“I expect to be self-insured in 10 years”
Financial independence, or the freedom to work (or not) the way you want, is a beautiful thing. If you’ve been following an aggressive savings and investment plan, living well below your means, and plan to have a solid safety net in place in the next 10 years, a 10-year term length could be sufficient.
You’ve done the hard work, and term life insurance can help you by bridging the gap to that time when you’re fully self-insured, for a potentially very low cost.
“I plan to be significantly healthier in a few years”
If you’re a smoker, overweight, or experiencing high blood pressure or cholesterol, life insurance gets much more expensive. However, if you have a family or debts to protect, it may not be smart to wait to apply for coverage until you are healthier.
A 10-year term policy could be less of a burden on your budget, while still providing you some financial protection as you quit smoking or adopt better lifestyle choices. You can then apply for a longer-term policy, if needed, once you have achieved that goal.
How much does a 10-year term life insurance policy cost?
Several factors determine how much you’ll pay for a life insurance policy. Your age, health, and habits like tobacco use affect your premium. Costs also depend on how much coverage you need.
For example, here are some estimated Haven Term premiums for non-smoking adults at different ages:
- 10-year, $250,000 policy for a 45-year-old man in excellent health: $13.17 per month
- 10-year, $150,000 policy for a 45-year-old man in good health: $14.58 per month
- 10-year, $250,000 policy for a 55-year-old woman in excellent health: $21.54 per month
- 10-year, $150,000 policy for a 55-year-old woman in good health: $21.05 per month
Wondering how much coverage is right for you? Take a look at your budget. Compare your household expenses, including debts (e.g., mortgage, auto loans) and assets (e.g., retirement or college savings). Also think about your dependents. How many are there? How long before you expect them to be financially independent? If you have a stay-at-home partner, will he or she be able to return to work? These numbers will give you an idea of how much it will cost to meet your family’s needs. And remember, use that life insurance calculator to help take the guesswork (and math) out of this decision making.
Is 10-year term length a better choice than 20- or 30-year?
When it comes to buying term life insurance, the best choice is going to be what fits your unique situation. The ideal length is one where your family is adequately protected, without taking on unnecessarily high premiums that burden your budget in the short term.
A 10-year term may help see your pre-teen kids through college or help ensure that your partner can retire as expected. It can also save you money compared to a 20- or 30-year term that you may not need as you close in on your financial goals. By analyzing your family’s needs and making use of online calculators, you can determine a term-length and policy value that’s your own, personal “10”. (See what we did there?)
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Chelsea Brennan is the founder of Mama Fish Saves, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.