Let’s talk time. Time has been on my mind because my son recently turned 15. He has grown from a tiny little bald baby to a towering red-head who adores baseball and Fortnite. As all parents can relate, those years went by in the blink of an eye.
In the context of term life insurance, time matters. Why? Because term life insurance is premised on a period of time. It provides coverage for a set period of time, which, depending upon which term length you choose, can last until your kids are in college or your mortgage is paid off. When the term ends, so does your coverage. That makes selecting the right time period especially important.
What is a term length
There are many choices when it comes to life insurance. One of the initial choices you will make is whether to choose whole life insurance or term life insurance. (More on term versus permanent policies can be found here.)
Many people opt for term life insurance. Why? Term life insurance is one of the simplest and most affordable types of coverage. It usually comes in set term lengths of 10, 15, 20, and 30 years.
If you know term life insurance is the right choice for you, you’ll need to select a term length, which is, fortunately, simple to do with an online life insurance calculator. The right term length takes into consideration your age, family structure, and debts to keep your loved ones protected during the years they need it most.
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Four types of people who might need a 15-year term length
Everyone’s financial situation is unique, so how do you figure out how long your term length should be? Take a look at the following types of people who may be good candidates for a 15-year term.
“I have kids”
If you plan to provide financial support to your kids until they are legally adults or through their college careers, then life insurance can help protect your ability to do so if you were to pass away too soon. If your kids are in elementary school, a 15-year policy can be a great choice to get them off to a great start in life.
Buying a 15-year, $750,000 policy as a healthy 40-year-old woman would start at about $32 per month.
“I have less than 15 years to go on my mortgage”
Losing a partner is devastating to the one left behind. One thing you can do to help ease the burden is to provide a financial safety net that could help pay your home mortgage in the event of your death. If you have 15 years or less on your mortgage, a 15-year term life insurance policy in an amount that will cover the outstanding balance might make sense. The proceeds from your policy could be used by your partner to help pay the mortgage and other day-to-day expenses while they adjust to their new situation – a welcome reprieve when it is needed the most.
“I’m retiring within 10 to 15 years”
For many, the goal of a life insurance policy is to replace the income that you contributed to your household if you pass away. As time goes on and your children leave the nest, your mortgage gets paid off, and you’re closing in on retirement, your financial needs may diminish, especially if you’ve set aside a sizeable nest egg. If this sounds like you and retirement is a shining beacon 10-15 years down the road, a 15-year term life policy could work well for you and your family.
Keep in mind though, that for some folks, maintaining life insurance into retirement is a good move.
“I plan on being financially independent within 15 years”
Depending on where you are in life, a 15-year time horizon may end in financial independence for you and your partner. Maybe your plan is to pay off all of your debts and sock away a lot of cash during your prime earning years, leaving you free of financial burdens that you cannot cover. In that case, a 15-year term might be a good option to provide a safety net during your build-up period. The bonus? Shorter terms such as 15 years typically cost less than longer terms such as 20 or 30 years. Be sure to re-assess periodically in case your plans change over that time.
Peace of mind might be closer than you think.Learn more
How much does a 15-year term life insurance policy cost?
Everyone has a budget and everyone likes to keep costs low where they can so let’s get down to some numbers. How much might a 15-year term life insurance policy cost?
Check out these premiums that non-smoking adults of different ages might pay:
- 15-year, $250,000 policy for a 30-year-old man in excellent health: $11.18 per month
- 15-year, $500,000 policy for a 35-year-old man in good health: $22.45 per month
- 15-year, $750,000 policy for a 40-year-old woman in excellent health: $27.88 per month
- 15-year, $1,000,000 policy for a 40-year-old woman in good health: $45.36 per month
Speaking of getting down to numbers, how much coverage should you get? To get a baseline, come up with a “personal balance sheet” for your family. You will want to include categories for all of your expenses (mortgage, credit card debt, student loans, Amazon habit, etc.) and your assets (college funds, retirement accounts, savings, etc.). Any shortfall between the two will be a helpful indicator of how much coverage you need. Also, consider the number of people who depend on you financially and how long they will be in that situation. If you’re not a numbers person, use our life insurance calculator, which will give you an estimate based on figures you provide.
Is a 15-year term length for you?
Life insurance comes in all shapes and sizes. With online calculators and the ability to apply online, purchasing life insurance has never been easier. Even so, choices need to be made about your policy, including how long the term should be. It’s a big decision because you are buying something that is meant to protect your family financially.
Do a financial inventory of where you are in life…and where you want to be and then take advantage of online resources to determine if a 15-year term makes sense for you. No matter which term you choose, you’re doing something important for your family. Remember, nothing says love like life insurance.
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Rachel Parisi is a freelance writer and attorney. She focuses her writing on insurance, financial services, and employee benefits. In her previous life, she served in the United States Air Force as a missile combat crew commander (think ‘Wargames’).
Opinions are the writer’s own.