How to Decide the Length of Your Term Life Insurance?

Guest post by Linda R. Chavez of Seniors Life Insurance Finder

Family changes over time
Family changes over time

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.

  1. How much coverage do you need?
  2. 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.

Life Insurance: Myths and Misconceptions

by Nicole Rubin, Guest Blogger

Life insurance is one of those things many of us don’t like to think about. Instead of looking into all the ways that life insurance could benefit us, we buy into the myths and misconceptions that tell us life insurance is too expensive, too complicated, or simply unnecessary.

The truth is, life insurance is none of those things — but it is really important. If you’ve been avoiding life insurance because of these myths, it’s time to learn the truth.

Top 5 Life Insurance Myths

Life insurance is expensive

Are you convinced you can’t afford life insurance? If you think life insurance costs are comparable to health or car insurance rates, you’re in for a pleasant surprise: If you’re a healthy non-smoker in your 30s, you could pay as little as $222 a year for $500,000 in coverage. That’s about $19 a month, or roughly the cost of a restaurant meal.

I can’t get life insurance because of a pre-existing condition

Many people pass on life insurance because they think that their pre-existing medical condition makes them too unhealthy to be accepted by insurers. The truth is that medical progress and the availability of preventative programs now allow many people with chronic conditions to live long and productive lives.

In step with that, life insurance companies will even offer preferred rates to people with health issues such as anxiety, asthma, depression, high cholesterol, hypertension, weight problems, sleep apnea and others.

I don’t need life insurance while young and single

Buying life insurance when you’re young and healthy can land you a better rate, but do you really need life insurance so soon? Even if you’re healthy, and childless, life insurance may still be a good idea. Accidents can happen any time; if they do, you’ll want to leave your family enough money to pay for a funeral and wrap up your affairs. If you have debt that’s cosigned by another person, such as student loans, life insurance is especially important.

Stay-at-home parents don’t need life insurance

There’s no question that life insurance is critical for your family’s breadwinner, especially if you have kids at home. However, even stay-at-home parents should be protected by a life insurance policy. The loss of a stay-at-home parent can be a huge hit to a family’s finances; not only must the surviving parent pay medical and funeral expenses, they also have to pay for childcare now that their spouse is gone. Life insurance covers these expenses so your family doesn’t suffer.

You need 10 times your income in life insurance coverage

10 times your yearly income is a commonly cited rule of thumb when it comes to buying life insurance. But rather than relying on simplistic guidelines, you can accurately estimate your life insurance needs by using a detailed online needs calculator to determine the amount you should get. It will take into account such things as lost income, debt obligations, the cost of college education, and funeral costs to determine how much money your family needs going forward.

While life insurance can seem like an unnecessary expense when you’re just trying to keep up with the monthly bills, buying life insurance is one of the best things you can do for your family’s financial security – just like you do when insuring your car, your home, and your health.

When you’re protected by life insurance, you can rest assured that your family will be cared for no matter what happens.


About the author, Nicole Rubin

I worked in the health insurance industry for years. Every day I fielded questions from people concerning their coverage and medical bills. I learned a lot about how the industry works, the limitations and challenges health insurance companies face, and the limitations and challenges faced by their customers.

Though a lot has changed since I worked in health insurance, I’m still very interested in the industry and the ongoing debate over how medical coverage should be handled in the U.S. I created Insureabilities to provide up-to-date information on the state of health insurance in the U.S. 

September is Life Insurance Month

How Much Does A Term Life Insurance Policy Cost?

Do You Know The Average Cost Of A Life Insurance Policy?

According to MarketWatch, 40% of Americans do not have a life insurance policy and, for many years now, the majority of those who don’t have life insurance choose not to because they think it’s too expensive. LifeHappens.org has found that people assume that life insurance is up to 3x more expensive than it really is! 

Life Insurance Policy Cost
Term2Go

September is life insurance month, so here is our guide to understanding the true costs of life insurance.

Life Insurance Policy Cost
Term2Go

Actual rate from QualityTermLife.com’s quoting system:

  • A 20-year-old man can get a $250,000, 30-year term life insurance policy for the price of 3 gallons of gas in California (about $13/month).
  • A 40-year-old woman could get $1 million of 20-year term life coverage for the cost of 12 Grande Starbucks lattes (about $45/month).
  • A 55-year-old woman could get $200,000 of 15-year term life coverage for the price of six cocktails (about $32 /month).
cost
Term2Go

Experts quotes for finding the right life insurance policy: 

When choosing a coverage amount, it’s best to start with what you want to accomplish. Think about what needs your family will have if you were to pass away unexpectedly. A 30-year-old with a newborn will have different needs than a 60-year-old who is thinking of retiring soon. Use a detailed online needs calculator to determine the amount you should get.

There are two main reasons to get a life insurance policy as soon as you have the need. First, rates are based mostly on age and increase as you get older. Second, life is unpredictable. Taking pressure of worrying about how loved ones will cover the mortgage or put food on the table without you will help you sleep better at night.

Infographic with more info below

cost
Term2Go

This Single Father is Getting Term Life Insurance

by David Chen, Guest Blogger

Prior to having my child, I did not think much about life insurance and simply lived each day as it came. Since the birth of my child, I have taken things a lot more seriously. I have gotten my health back into tip top shape and now I am making sure to save money and think about the future. It truly is amazing what a kid can do. They put things into perspective for you. After all, you have a tiny human depending on you for EVERYTHING. It’s a lot of pressure.

As I think more and more about life insurance and what it would mean to me, as a single parent, for my daughter, I have decided to choose a plan and purchase it. Below, I will talk about why I want the plan and how to go about getting one.

Why Life Insurance?

Think about it for a moment. What would happen to your family if you were to suddenly die today or tomorrow? Would they be able to sustain themselves financially? Would they be okay without you? Often times, the answer is no. I know that if I were to die today as I write this, my child would not be taken care of without a life insurance policy in place.

The reason I want to take out a policy on myself is so that my child is protected. My child’s future is secured and in place. My child will not be left dependent on welfare once I am gone, should the worst happen to me.

Before I do take out a policy though, I need to know how much to take out. This number should be one that would sustain my child through her years until she is old enough to take care of herself. Therefore, a $10,000 policy is not going to be enough should I die tomorrow and she is only 10 years old.

Basics on Getting Life Insurance

There is a lot to know about life insurance. It took me time to read, research, and learn about it before I was able to settle on what would work best for me in my situation. I learned that an insurance policy will help to:

  • Pay the rent or mortgage on my home
  • Setup a college fund for my child
  • Protect my child’s future
  • Pay off any debts I currently owe
  • Help to maintain my child’s standard of living

I found a nifty little calculator when I was determining how much life insurance I would need and it helped me determine that I needed a policy in the amount of somewhere between $300,000 and $500,000. This was a wakeup call to me and it really kicked me into gear.

I also learned that there are two kinds of life insurance you can buy: term or permanent. Term life costs less and is the right product for anyone with dependents, debt and minimal savings. It is straightforward to understand and easy to buy. Permanent life insurance, on the other hand, is expensive and complicated. Financial gurus, including Suze Orman and Clark Howard, do not recommend it for the average person.

Final Thoughts

Who knows when I may kick the bucket and I truly hope it is not for a long time, but it is not something that we can know and I want to make sure that my daughter is completely taken care of when the day does come. I visited QualityTermLife’s website where I could comparison shop from dozens of companies who offer term life insurance. I chose a quote at a cost of a little over $20 per month for a $500,000 policy that will cover me for 15 years. Long enough to see my daughter through college, and I am confident that with my current savings that this amount will be enough for my child.

If you want to take out a term life insurance policy, you should explore your options and find out what the recommended amount is for your loved ones to sustain their way of life. You may be surprised at how much you need, yet how affordable it is. Knowing that they will be taken care of will allow you to close your eyes each night.

Dave Chen is the main contributor and owner of Millennial Personal Finance. He puts his extra time into his blog while handling life’s responsibilities including his job as an engineer, his job as a single parent, and his love for skiing (okay, maybe that one is more of a hobby).

Term Life Insurance explained in 2 minutes

It’s true. This short, cute video sums it all up very nicely.
One of the most important tips comes at the very end, though. So let me call it out here: Comparison shop!

This so important because over the course of a typical 20 year term policy, saving even a few dollars per month can really add up!

QualityTermLife offers term life insurance quotes from dozens of top insurance companies, ensuring that you will get the best price.

Originally posted on Vimeo.

Most Americans Don’t Have Enough Life Insurance

Fascinating infographic on the life insurance gap in the average American’s financial plan.

What stands out is the reason for the lack of insurance: People think it costs to much.

What we really have then is an information gap because, according to the survey, life insurance is not expensive. Most people pay less than $50/month. If you take a look at our Quote Engine, $40/month is going to buy a middle-aged consumer hundreds of thousands of dollars of coverage.

InfographicL Insurance gap

Source: Bankrate.com

How Much Life Insurance Should I Get?

Short and long-term considerations determine coverage amount

The basic premise of life insurance is to provide a financial cushion for your dependents. The question then becomes, how much of a cushion do you need?

There are a variety of methods and formulas you can use to determine how much life insurance coverage is appropriate for you and your family.

You can look at it from two perspectives: the immediate need and the long-term need.

The immediate need

This refers to the money that will be needed to cover funeral expenses and help your family get through the initial months immediately following your death. This is the time when everyone is still reeling from the shock and trying to figure out how best to get on with their lives. Life insurance can provide a quick financial buffer to help families through this transitional time period.

The long-term need

This refers to the economic needs of the family over a longer time horizon. How much will be needed to cover the family’s annual living expenses? This is often broken down into two categories — one for the living expenses while the children are still at home, and the second for the living expenses for the surviving spouse after the children have moved out: including how much is needed to pay for college costs for the children, and how much to pay off the mortgage?

Unique Needs

This works out differently for every family based upon their unique needs and circumstances. For instance, single-income families dependent on the income of a single wage-earner will have a different set of needs than a two-income family. Additionally, if there is a stay-at-home parent, it is important to calculate the economic impact if he or she were to die, such as the cost of child-care expenses and running the household.

There are a variety of calculators available on the Internet. These can be a great starting point, though I always think it is good idea to discuss your specific situation with a life insurance professional, such as the expert advisors at Quality Term Life Insurance.

Source: Laura Medigovich

How to Get the Best Value in Term Life Insurance

How to get the best value in term life insurance policy? Just follow these 3 important tips.

1. Don’t wait! Get your policy as soon as possible

Rates go up with age. The longer you wait, the more expensive it gets. If you realize it is a necessity in your life, then your best bet is to get it when you can get it at the cheapest price possible.

2. Exercise and clean up your diet

When getting a term life insurance policy, how much you pay is determined on how healthy you are.

If you’re overweight, or have minor health issues, it doesn’t take that long on a good program to turn yourself around.

If your weight is proportionate to your height, and you have no major health issues you will get the least expensive rate.

Obviously, there are other positive benefits to staying healthy than getting affordable life insurance. The main one I can think of is to make sure you outlive your insurance!

3. Stop Smoking, Really!

Not too long ago, we had a client that was applying for a term life policy. He had indicated that he doesn’t smoke or use tobacco, but sure enough a week before he was to have his physical done, he was at a wedding and decided to indulge in a nice, fat cigar.

Even a small quantity of tobacco in your system is going to show up if it got in there seven days before the exam. Sure enough, the tobacco showed up on the test, and the premium he was going to have to pay went up – a lot.

Life insurance for smokers or tobacco users is expensive. So keep in mind that, even if you are are a regular smoker, if you quit for 1-3 years (it takes that long for residue to get out of your system), you will be able to get the cheapest term life policy, available.

You can use the quote engine on the Quality Term Life site to compare policies from over a hundred different companies. Try out different amounts and years of coverage. Watch how the rates change if you select Tobacco!

4. Shop around!

You wouldn’t buy a TV from a door-to-door salesman and you shouldn’t by life insurance from one either. No, as savvy consumers, whenever we’re about to make a major purchase, we double check for better prices elsewhere.

Life insurance shouldn’t be any different than shopping for a car, cellphone, or TV. There are lots of insurers competing to sell policies to all types of different individuals, across the spectrum of weight, ages, health status and insurance amount.

As an independent insurance agency we make the current competition in the life insurance industry work for you. So, we offer products from dozens of different life insurers.

That’s it! 1, 2, 3 to huge saving on term life insurance.