As a life insurance agent the most popular product I sold was term insurance because of the low cost relative to the high level of death benefit. Insurance consumers know they want to protect their family and want to provide the most money in the event they pass away early. What most people don't know or fail to understand is what length of term life insurance they should get.
What are my options in term length?
Most life insurance companies will offer term insurance for 5, 10, 20, and 30 years. There are a few companies that offer additional terms than those but that is the norm. Expect the premium to increase with each term since it is covering a longer period of time and the likelihood of death increases.
What should I consider when choosing the length of a term policy?
Many people will just choose what they can afford each month without considering why they need it. For many families life insurance is there to provide income or pay for education. Use the following guidelines when choosing the length of term life insurance:
- Pay for education - Choose a policy that will last beyond college age for your children. For example if your youngest child is 10 then get a 20 year term minimum if you want to guarantee your child's education is paid for in the event you pass.
- Pay off debt - Decide which debt you want to pay off including credit cards, mortgage and auto loans. Then have a life insurance policy that will last as long as you think that debt will be around.
- Provide income to maintain lifestyle - This is probably the hardest one to determine but figure it will take many years to cope with the loss. A good rule of thumb is to provide for the number of years up to retirement age.
Should I wait till I have a family to get term life insurance?
The best part about having a life insurance policy active is that you are guaranteed to be insured during that policy period. If you were to be diagnosed with a life threatening illness your life insurance will still provide protection until the end of the policy period. This is something most young adults don't realize and why they wait until marriage or children to get life insurance. The younger you are the cheaper the life insurance will be and you will be protected from unplanned events.
Whatever the reason you want to have life insurance it should always cover the time in your life when expenses are the highest. This period of life is generally when you begin a family and you are still consuming the most unlike post retirement age. Remember that life insurance is a means for your family to maintain a lifestyle and continue to live their life in the event you lose yours.