Term life insurance is one of the most popular life insurance products on the market and with good reasons. It’s simple to understand, its affordable, and its pure protection life insurance. When shopping around for a term life policy you will notice you are able to pick lengths usually between 10 to 30 years, depending on which companies you are shopping with. It’s often easy to just buy the most affordable option with the 10 year term but is it the right choice? Let’s cover some basics of what term life insurance is and discuss this dilemma in detail in this article.
What is 10 Year Term Life Insurance and How Does it Work?
A 10 year term life insurance policy is life insurance coverage that is designed to stay locked in for “term” of ten years. That means during that ten-year period your monthly premium payments will not go up or down and are guaranteed to stay level. This is why it’s called a level term product. If you keep paying the premium your coverage will remain in force. If, however, you ever decide you don’t need coverage at any time during the ten years you have the right to cancel the policy without consequence.
What Happens After 10 Years?
It’s a common misconception with term life insurance policies that once the term expires you get to enjoy being covered without having to continue payment. That is not the case. Once the coverage expires it is expired. At this point you have 3 options: let it expire, renew it annually, or convert it.
- Let it Expire – if you let the coverage expire you will no longer have coverage. If you decide you need coverage again down the line you will have to restart the application process all over again, which means proving good health. The downside is your health may not be as good as it was in the beginning of the term.
- Renew it Annually – this is an option that any good term life insurance policy comes with that allows you to renew the coverage without having to re-apply and prove good health. This isn’t the best option because it will renew at your new age at the expiration of the term and then every year thereafter. This can cause an astronomic rate increase over time.
- Convert it – a good term life insurance policy should come with an option to convert the term to a permanent life insurance policy. The conversion can take place at the end of the term or usually before age 65. You will be able to convert the policy on a guaranteed basis despite any new heath issues. You will keep your health class that you were approved for at the inception of the policy, but your rate will be adjusted to your new age.
Is 10 Years Enough?
Like most things life insurance, the answer is: it depends! This is because, like a fingerprint, how much life insurance you need and how long you need It for, is unique to you.
When it Makes Sense
A 10 year term life insurance policy makes sense in 3 scenarios that I can think of: you only have short term responsibilities, you need it for a loan, or it’s all you can afford at the moment.
Short Term Needs
One of the occasions where a 10 year term makes sense is if your need for life insurance doesn’t extend beyond ten years. Let’s say you have a 14 year old kid who will probably be out of college in 10 years along with a mortgage you only have 8 years left to pay. If this is the case than your highest risk years will be over by year ten and your need for life insurance will drastically decrease. This is unless, of course, something drastically changes. Like you adding another member to the family.
It’s All You Can Afford
This is one of the most common reasons people get a 10 year term policy in place, because it’s one of the most affordable life insurance options on the market. Why? Because statistically speaking the chance of you dying isn’t high, so life insurance companies give you some leeway. If a 10 year term policy is all you can afford then it’s an absolute must that you get one. Because if it is hard to make ends meet now, you don’t want to think about what would happen if you were no longer around to provide. Getting an affordable term life policy in place is the best move you can make. It’s much better than not having anything in place.
Loan Assignment
Often loan companies will require you to get a term life insurance policy to make sure that they can still get their money if something happens to you. If this is the case and a 10 year term policy will make sense.
When It Doesn’t
The only time it doesn’t make sense for you to get a 10 year term life insurance policy is if you can afford more coverage and your need for life insurance stretches beyond ten years. If you have a 30 year mortgage and two toddlers who you will want to attend college then you definitely want to have longer coverage in place if you can.
Can’t I Just Get More Coverage Later?
Yes, no and maybe so, let me explain. Let’s say your term policy expired and you a year later you decided you want more coverage. Not only would you have to worry about the higher rate for your new, older age. But your biggest concern will be to see if you can qualify for coverage again. You may be too sick or too old to qualify for another policy, and that’s not a risk you should be willing to take with your family. If a ten year term is all you have and you have the need for longer coverage, always exercise the convertibility option, you can always lower the coverage amount if it gets too expensive or your need for coverage declines.
What a Good Term Life Insurance Policy Should Have
There are certain things that good term life policy should have included at no extra cost so make sure to ask your agent about this when doing your shopping.
Option to Convert – this is what I’ve been discussing throughout the entirety of the article. Every term life product should come with an option to convert to a permanent one. This add on should come at no extra cost and the agents that don’t sell it are criminals in my book.
Accelerated Death Benefit – Another good add on that should come with the policy at no extra cost is the accelerated death benefit rider. This add on allows you to receive up to 50% of your death benefit amount if you are diagnosed with a terminal illness. It’s one you hope you don’t have to use but it’s there just in case, much like a term policy.
Do Your Shopping
When it comes to getting a 10 year term life policy in place always do your comparison shopping with all of the companies to avoid over paying. Companies all charge different rates for different ages so the same product with company A might cost twice as much with Company B even though there is ZERO difference in the benefits.
The Good News
You’re at your destination. InsureChance is an online life insurance marketplace that lets you compare the rates with all of the life insurance companies on the market at no extra cost to you! To compare quotes for ten year term life policies simply visit our term life insurance quotes page or use the quote engine on this page. You will have over 60 A rated company to compare with. If you have any questions call us at 888-492-1967 or hit the chat button below. Welcome to InsureChance!
