Term Life Insurance Policy Length

Written by Scott W Johnson

When considering and analyzing Term Life Insurance Policy Length – one needs to consider the universe of possible options combined with your individual needs.  The needs for  you and your family.  The simplest rule of thumb is often to consider how long it will take your youngest child to reach and possibly graduate college.   So if you have just had a newborn, then a 20 year term policy is often the best bet.   However for many, the calculation is not nearly as simple.

Others consider how long it may be until they no longer have a financial need for a life insurance policy.  Perhaps until a home is paid off, or you attain a certain age.   Some financial advisers suggest that you more than likely may not want or be able to afford a life insurance contract once our retired.

One thing about selecting the proper term life insurance length is that each person’s situation is unique.   When you have kids or loved ones that depend on you, any life insurance is usually better than no life insurance.

“any life insurance is … better than no life insurance”

Term Life Insurance Policy Length

The 10 Year Term Policy

As a general rule a ten year term life insurance policy is about the lowest term length that is mass marketed.  The ten year is a great top layer of life insurance policies for many.  Already have a 20 year $1MM policy and want a bit more as your wealth increases?  A 10 Year $250,000 contract may just get you there.  This policy length’s biggest benefit is its general low cost when compared with longer term lengths.   Obviously the short period is also its biggest detraction.

Fifteen Year Term Life Policy

The 15 Year Term Policy

In my office we sell a fair amount of fifteen year level term insurance policies because of what I call the “Baby-Daddy Comma” syndrome.  It happens like this.  Mom and Dad are relatively financially organized until they have their first child.  For the first two years, they live in awe of the beauty of their new daughter and focus on little else.  For the next two years they are sleep deprived and exhausted, what with play date scheduling and with everyone trying to pick up their lives again.  It is often not until the baby becomes a toddler and is either four or five that the parents start to realize that they need to get their financial plans back in order.  This often involves setting up a will/trust and of course purchasing some life insurance.   When their daughter turns four they may wish to save a bit on the policy and opt for a fifteen year term rather than a twenty.

Twenty Year Term Life Policy

The 20 Year Term Policy

I consider the 20 year term policy to be sort of the gold standard.  Fairly priced and long enough to actually cover a chunk of your life, it is a relatively common product.   If you are 30 years old when you purchase a twenty year you will attain the age 50 when it expires.   A 20 year term life contract is well matched with a newborn child, I find.   But twenty year term life policies are often good for people without children as well, as it covers a good period of time.

Twenty Five Year Term Life Policy

The 25 Year Term Policy

The twenty five year policy (as with the 30 year) may be advantageous for women more so than men.  It may also be a suitable product for younger men as well.  Why do I often suggest a twenty five year level term life for some women.  Actuarilly speaking women, all other things being equal, women will live longer than men,  And therefore their rates can often be more favorable.   Since their rates can be lower it often makes sense to have them extend their term length from the more standard 20 year contract.  Another consideration could be in the somewhat common occurrence whereby the husband is slightly older than the wife.  In this situation too, a 20 year term policy for the husband may be paired up with a 25 year term policy for the wife.

Thirty Year Term Life Policy

The 30 Year Term Policy

The 30 year term length contact is really ideal for people wanting a longer term life insurance coverage.  Sometimes these are folks that may still be interested in whole life insurance policies or folks that are very young.   Thirty year term policies are generally not nearly as common, however they are probably not sold as much as they should be.   In the somewhat common situation when people want to purchase a policy at the time of their first child’s birth, a 30 year really allows the client to have a large cushion of time with enhanced insurance coverage.   As with the 25 year, a 30 year is sometimes used for the wives or the younger of the two spouses.   Depending on your age, a thirty year will cost you more money.

The Beyond 30 Year Term Policy

Occasionally clients are interested in a unique term life insurance policy length.   Sometimes these proposed policies are called Lifetime Term.   Why would people be interested in such insurance policies?   Often I find their situations to be unique.   Sometimes there is a specific need to have an exact insurance death benefit indefinitely.   Sometimes it is because clients are still in love with the idea of having life insurance for their whole life.   Is a beyond 30 year term life insurance policy generally suggested?  Maybe, maybe not.

The Whole Life…. term?

Any discussion of term life insurance lengths that did not take into the possibility that a whole life or permanent life insurance policy might be your best choice would be unfinished.  Obviously Whole Life is NOT a term life insurance policy.  In fact they are polar opposites.   As this website has stated numerous times, we believe that Whole Life insurance does have its place.  However given its extreme costs, compared with term life, whole life may be too expensive for many.   However, this opinion, is based on people that are able to qualify for a level term life insurance policy.  Some life candidates may not qualify for it, and the only option available to them may be a some sort of guaranteed issue or final expense policy.

“…whole life may be too expensive for many.”

Otherwise  whole life can be a good option for those that need to set up a special needs trust.  Others find it helpful it they are very wealthy and looking to put money into a somewhat sheltered vehicle.  A analysis of whole life insurance in comparison should always be done for those that are considering it as a candidate.  How to determine it for you and your family?   Ask for guaranteed and assumed values in a charts.  Understand the difference.  Compare their charts with your own calculations of buying term and safely investing the difference.


Term Life Insurance Policy Length Tools:

There are tools, online, that may be able to assist you with selecting a term life insurance policy length.

Start off, by using the Social Security Administration’s Life Expectancy Calculator.

Next, use Bankrate’s Mortgage Payoff Calculator.

Then try Saving For College World’s Simplest College College Cost Estimator.

Last: try a Term Life Rater.

These are just a start, but may be able to assist you in your journey.

Procrastination is not your friend with term life insurance.

Term Life Insurance Policy length

So what is the best Term Life Insurance Policy Length?   The answer really depends on your circumstances.  Each person, their family, and their circumstances are different.  It is a cross between cost and benefit.   Affordability vs Value.   Perfection vs Imperfection. Any life insurance policy is generally better than no life insurance policy.  Sometimes over evaluating the situation and not making a decision is far worse than making a less than perfect choice.  Often over analyzing the Term Life Insurance Policy Length may not be worth it.  Typically a life insurance policy can be quoted, applied for, reviewed, and placed in force in relatively short amount of time.

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