YOU ASK:

10-, 20-, or 30-year term life insurance - which is the best term life insurance plan?

WE ANSWER:

It is necessary to understand the nuances of these three types of term life insurance to decide which term is best for your family.

  • 10 Year TLI – it is common for consumers to go for this policy because of one of two reasons. One, those who purchase this usually plan to buy a longer one in the future. Because of a tight budget, this type of term policy allows them to get the coverage they need right now. Also, some consumers think that in case they may not be able to qualify for a new policy, the current carrier may allow conversion into a permanent one.

    The second reason is that it will address a medium-term concern. For instance, there is now a teenager in the family. The father purchases this policy to ensure that the child will have the funds to help him go through high school as well as college in the event something bad happens.

  • 20-year TLI – An important factor when deciding for this type of coverage is the time when the individual will be making the purchase. For instance, the family is expecting their first child. A twenty-year policy would be just right to protect their child as he grows up.

  • 30-year TLI – Consumers tend to opt for this policy when they are planning far ahead into the future. For example, a young family has several children. With a 30-year coverage, the children are protected up to the time they graduate from college. Others may go for this because they are aware of the possibility of them outliving shorter-term policies. With shorter policies they may have to reapply again and they fear they may not get qualified by then.

Price difference between 10, 20 and 30-year life insurance

To determine current price differences we used a price comparison website. In the following tables we highlight 3 companies and their prices for a 25-year old, non-smoking female. Face amount is $250,000.

10-year 20-year 30-year
Company Annual Monthly Annual Monthly Annual Monthly

A

105.27

9.08

135

11.75

172.5

15.01

B

105

9.14

140

12.25

187.5

16.41

C

107.5

9.41

143.38

12.37

192.19

16.58

What happens after my term expires?

Your options are:

  • Get a new policy – if you are still in good health you might be able to shop for a cheaper policy whether term or permanent. Also, you may only need a shorter term this time around which helps to bring the premium down.

  • Convert to a permanent one – this may not require you to be in good health. If your health has deteriorated this could be a good decision.

  • Consider paying renewal charges – if your budget allows it and the other options cannot work out for you, paying for renewal premium could allow you to still have insurance.

  • Get a lower death benefit – by decreasing the death benefit you may get lower premiums.

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