Buying term life insurance can be convenient when you’re purchasing coverage from an online life insurance agency like Haven Life. You decide how much insurance coverage you need based on the death benefit, get life insurance quotes and submit your application. If your application is approved, you pay your initial premium to get your coverage started. You may have to take a medical exam as a condition of qualifying for coverage, but other than that, it’s relatively easy to have your life insurance needs met.
One of the biggest decisions to make, however, centers on how long you need and want your coverage to last. Remember, term life insurance is exactly that, coverage for a certain “term” or period of time. Once the term ends, your coverage ends. That’s different from a permanent policy, which offers lifetime coverage as long as you pay your life insurance premiums as agreed.
If you’ve decided that term life coverage makes more sense than a permanent life insurance policy, it’s important to ensure that you’ve chosen the right term length. After all, you want to make sure your family has coverage during the years they need it most. And, choosing the right term length from the beginning can save you money down the road.
With that in mind, here’s what you need to know to decide whether a 30-year term life policy is right for you.
What is a term length and why is it important?
Individual term lengths can vary from one insurance policy to another. But typical term lengths are 10, 15, 20, or 30 years. The right term length for you will cover your family during the years they’re likely to need it most if something happens to you. That could mean until your kids are out of college, for example, or your mortgage debt is paid off.
So why does term length matter?
The biggest reason is that choosing a longer term can offer peace of mind for yourself and your family. When a death is untimely, it can leave your loved ones in a tight spot financially, especially if you’re the primary breadwinner for your family. If they rely on your income to pay the mortgage, pay off credit card debt or meet day-to-day expenses, then choosing the right term can be critical for preserving their financial health after your death.
Consider what might happen, for example, if you’re buying life insurance to cover you to a certain age, say 50 years old. You reach your 50th birthday and you’re still in excellent health, so you don’t bother to renew your term life insurance or switch to a permanent life insurance policy. You still owe $100,000 on your mortgage, but you assume you’ll have plenty of time to pay it off.
But then the unexpected happens and suddenly, your family no longer has your income to rely on. The death benefit that could have provided them with money to meet expenses is no longer there. This isn’t a situation people plan on, but it’s a risk to be aware of if you remain in good health and outlive your life insurance term.
One thing you don’t want to worry about when you shop for insurance is the insurance company’s financial strength. You should feel confident that the company you buy from is going to be around and able to pay claims decades in the future. Take five minutes to find out more about how financial strength ratings work and why they should matter to you.
How term length affects life insurance premiums
Aside from making sure your family’s financial needs are met, there’s another side to choosing a life insurance term. Your insurance coverage, along with your overall health and the results of your medical exam, can determine how much your life insurance costs.
The amount of coverage you buy and the term length will have a direct impact on the price of your term life insurance policy. The longer your life insurance coverage term, the more you’ll pay to be insured.
Here’s an example of how much the cost could differ, based on what a healthy 30-year-old man would pay for $250,000 in term life coverage. Assuming he’s in excellent health, his monthly premium payments would be $26.53 based on a 30-year term with a Haven Term policy issued by MassMutual. With a 20-year term instead, the monthly premium payments drop to $17.43.
The total cash outlay for the 30-year policy would be approximately $9,226.80, assuming he pays the premiums for the entire term and his beneficiaries never have reason to need the policy’s death benefit. The 20-year policy would cost $4,183.20 over the entire term, less than half the cost.
But, having that long-term policy could make sense for a primary breadwinner who’s worried he (or she) might need coverage for financial needs beyond a shorter time period. . An online life insurance calculator can help give you an idea of what term would best meet your needs. It will take into consideration factors such as your age, your income level, whether you have children, their ages, and your debt outlook.
The higher price just isn’t in the budget for everyone.
Of course, the younger you are when you buy life insurance coverage, the better your health, the lower your premium payments are likely to be. If you’re in your 20s or early 30s, for instance, your age works in your favor for getting covered at an affordable cost. And, term life insurance is by nature less expensive than a permanent policy, since it only covers you for a set term.
Keep in mind, however, that certain factors can increase the amount you’ll pay for term life insurance. As part of the underwriting process, you’ll need to answer questions about your health. You also may need to take a life insurance medical exam, although some applicants may qualify for our InstantTerm process, where some applicants, ages 18-59, seeking a $1 million death benefit or less may be able to finalize coverage without a medical exam, based on the information provided during the application process. Customers are notified once an app is submitted if they qualify to skip the exam. [A note from our lawyers: Keep in mind that it’s always very important to be honest in the application process. The issuance of the policy or payment of benefits may depend upon the answers given in the application and their truthfulness.] Having a health condition, such as diabetes, for instance, could mean higher premium payments.
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Is a 30-year term length the best option?
A 30-year term length is a popular choice because of the longer-term coverage it offers. While there’s a definite cost difference between a 30-year term and a shorter term life insurance policy, the additional years can provide great peace of mind.
At the same time, you have to consider whether and how a longer term matches your goals, needs and budget. Here are some of the most common scenarios where you might question whether a 30-year policy is right for you..
“I have a 30-year mortgage.”
A 30-year term life insurance policy is a great option for families carrying a, you guessed it, 30-year mortgage. Or, who have somewhere between 20 and 30 years to go on paying down their home loan.
On a monthly basis, most of us pay more toward housing costs than any other category of expense. If something should happen to you before the mortgage is paid off, your policy could help your family continue to make the monthly mortgage payments or help pay the entire balance in full.
That could allow your family to stay in the home after your death, which might be important to your spouse and your children. Being able to remain in the family home can make a difficult time easier to process and transition through, especially if your children are younger.
“I’m a newlywed.”
If you’re younger and recently married, getting life insurance coverage may be the last thing on your mind. But it’s an important step to consider if you want to increase your financial strength as a couple.
An online life insurance calculator will usually recommend a 30-year term policy for young, married individuals. Why? It’s likely you both rely on each other for some kind of financial contribution – whether it be for large bills like mortgage or other small day-to-day expenses. If you and your partner are in your early 30s, a 30-year term can protect both of you until your early 60s, a time when many people hope be winding down debt and closing in on retirement plans. Both spouses need coverage.
Also, at some point, your family may expand. In that case, you’d want to make sure you and your spouse are protected. Getting a term life policy when you’re young and less likely to be affected by adverse health conditions can save you money over the long term compared with delaying your purchase of coverage until later.
“I’m the primary breadwinner.”
Being the primary breadwinner is a big responsibility. Even if there is another source of income, your family likely relies on your income for their overall financial well-being. For young families, a 30-year term policy can be an ideal choice to help protect your income until your children are adults and your partner is at or near retirement.
By the way, even if your spouse is a stay-at-home parent and doesn’t earn a salary, he or she probably still needs life insurance. If something were to happen to your spouse, you may need to hire a nanny or housekeeper to help run the household so you can continue earning an income to pay the bills.
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“I have a special needs child.”
While many parents’ needs can be met with a 20-year term length, which will often cover their family until the kids are in college, those with a special needs child should consider longer coverage. Depending on the nature of your child’s needs, it’s possible that their health will require you to care for them indefinitely.
Term life insurance offers an affordable way to help financially protect your family while you’re busy saving away for emergencies, retirement and other financial needs. For those with a special needs child who may need lifelong care, a 30-year term buys parents more time to set up a financial plan for the child’s future.
“I have substantial debt.”
Although housing and family obligations make up the bulk of most family’s monthly expenses, don’t forget to factor in other debts when deciding on a term length. Some debts are usually forgiven if you were to die — like federal student loans. However, private student loans and other unsecured debts are not typically forgiven. Those financial obligations may very well be left to your cosigner or spouse if something happens to you.
Substantial student loan debts can follow you for years or decades if you’re paying the minimum amount each month. Make sure, no matter which term length you choose, that your term length lasts until those debts are expected to be paid off.
Aside from student loans, you may also be carrying credit card debt, a car loan, personal loans or business debt. Like student loans, debts cosigned by your spouse would become their responsibility upon your death. And if you live in a community property state, debts incurred during the marriage — even if they’re in one spouse’s name only — may be passed on to the surviving spouse when one of you passes away.
While you might have a solid plan in place for repaying debt, life can derail your schedule. A 30-year term policy would offer a long enough window to resolve any outstanding debts, with the reassurance that money would be available to repay them if needed.
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Advantages of 30-year term life insurance policies
As the different scenarios outlined here show, lots of people could benefit from a 30-year term policy based on their life circumstances. Along with the peace of mind that all life insurance brings, 30-year term policies offer other considerations, chief among them that you are locking in a set premium for the entire period of time the policy is in effect. This level price makes a 30-year policy a pretty smart (and affordable) buy for those who need coverage for a longer period of time.
Imagine if you could have locked in some of these prices 30 years ago:
- A gallon of gas: $0.91
- A movie ticket: $3.50
- An average new car: $10,400
Not too bad, right?
Here are Haven Term policy monthly rates for adults in excellent health at different ages might pay for a 30-year policy:
|Source: Haven Life|
As you can see, age matters for calculating the cost of premium payments. But if you’re young and in good or excellent health, you can expect to pay less for term life insurance coverage overall. And knowing that you have a longer period in which your coverage applies can be much more valuable than any cost savings you could realize by going with a shorter term.
Is 30-year term life insurance right for you?
When it comes to buying life insurance, choosing the right term length helps ensure that your family is adequately protected. A 30-year term, in particular, provides a “better safe than sorry” length of protection that can last until the kids are adults, the mortgage is paid off, and you and your spouse are enjoying retired life. It also gives you many, many years having affordable life insurance coverage in place so you can focus on other things besides insurance, like building a financial safety net that many of us don’t have in our 20s, 30s and 40s.
With the help of online life insurance calculators and through an analysis of your family’s needs, you can easily compare rates and determine whether a 30-year term life policy is right for your family and budget.
No matter what policy you choose, having life insurance in place is an important part of your overall financial plan. Knowing that you are taking a step in the right direction to financially protect the people you love most is priceless.
Rebecca Lake is a freelance writer specializing in personal finance and small business. She lives on the North Carolina coast with her two children.What Haven Life customers are saying: