Guest post by Linda R. Chavez of Seniors Life Insurance Finder
Term life is the simplest and most affordable type of life insurance.
Insurance companies usually offer term life insurance policies in increments of 10, 15, 20, or even 30 years at most.
The death benefit of a term life policy typically ranges from $100,000 to $500,000. It can be more or less, depending on the carrier.
Upon the death of the insured, the payout is tax-free. It can be used by the beneficiaries for anything they see fit – funeral expenses, mortgage, debts such as medical bills or student loans, or even day-to-day expenses.
There are two main questions you have to ask yourself when buying term life insurance.
- How much coverage do you need?
- How long do you want the policy to last?
How Much Coverage Do You Need?
The precise answer to the first question is that it entirely depends on your circumstances. Still there are different opinions on how you can decide the death benefit amount:
- Use 6 to 10 times your annual salary.
- Multiply the years you still have until retirement times your annual salary
- Multiply much the beneficiaries spend each year to maintain their standard of living times 20. The reasoning behind this is the beneficiaries can use 5% of the payout each year – enough to maintain their current standard of living. They can then invest the rest of the benefit to make an earning of it.
- The best choice is to use an online life insurance needs estimator that covers all the bases. QualityTermLife’s needs estimator is free, powerful, and easy to use.
Keep in mind that the more the coverage you have, the more expensive your payments (known as premiums) will be. Aside from the amount of coverage, the cost of premiums also depends on your age, health, and sex.
How Long Do You Want the Policy to Last?
When deciding the length of your term life insurance policy, the general rule of thumb is for it to last as long as your dependents will rely on you financially.
Let’s say that you have children aged in their teen years. They will depend on you until they have jobs of their own – which is around 10 years from now. Experts advise buying a 10-year term life policy.
However, if you’re a new parent, you will need a policy that covers you for around 20 years or so in order to protect your children past the age of eighteen.
Another common reason for life insurance is if you have just bought a house. You will want a 30-year term life policy to pay off the mortgage as well as provide a financial cushion for emergencies.
The Longer the Term is, the More You Pay
The longer the term of your life insurance, the more likely you are to die while the policy is in force. Thus, the company is likelier to pay out the death benefit.
Here is a chart that displays different the rates for a $500,000 policy with term lengths of 10, 20, and 30 years quoted for a 35-year-old male in California with a Preferred Plus health rating, non-smoker*
| Term Length | Avg Monthly Premium* | Best Quote from QualityTermLife |
| 10 years | $20.20 | $14.52 (see it here) |
| 20 years | $29 | $21.07 (see it here) |
| 30 years | $44.50 | $34.79 (see it here) |
- These prices are the mean average of 11 carriers, including AIG, Mutual of Omaha, Pacific Life, Prudential, and Transamerica.
Does this mean then that a longer term life insurance policy should be avoided? Well, not really. Buying a longer term life insurance policy has its advantage.
It allows you to lock in lower premiums that will never increase even if you develop severe health conditions in the duration of the term.
Decide on the Length of Your Term Life Insurance
Your term length should depend on your longest monetary responsibilities. Mortgage, or providing for a child .
The important thing to remember is that as long as your dependents need your financial support, you should be insured.