Jason Fisher One of the most popular products in the marketplace is 20 year term life insurance… but is it right for you?
Thinking about one’s own mortality isn’t very pleasant. This is true no matter how young or old you are.
But preparing for your death by purchasing life insurance, even if you’re only in your 20’s or 30’s, can have a lot of benefits.
A 20 year term policy is a popular choice for many people, especially the relatively young and healthy.
Think a 20 year term insurance policy can help you and your family?
Check out our complete guide below, or grab a quote directly on this page to get instant rates.
Who Should Purchase 20 Year Term Life Insurance?
Many people don’t really consider purchasing life insurance when they’re in their twenties and thirties. After all, the average life expectancy for a person in the U.S. is 78 years of age.
Younger people, and even middle-aged adults, often feel that buying life insurance is an unnecessary expense, especially when the threat of death is likely decades away.
The truth is, life insurance can be pretty important. If you purchase certain types of policies, life insurance can also be more affordable they you might imagine, too. Term, for example, can be purchased for pennies on the dollar when compared to whole.
Life insurance is important for all adults who have children or dependents. If something happens to you, life insurance is a way to help with their financial security immediately and for years to come. You can even buy a policy specifically to help with future college expenses, if this is something you feel is important enough to provide for.
If you have a spouse, life insurance is also often a sensible choice. Your spouse might be faced with an unexpected loss of income. Even if they work, they will likely want to take some time off, and also not liquidate any assets just to keep the roof over their heads. Death benefits can help cushion a variety of financial problems which are unforeseen.
Life insurance can also be a good idea if you’re single and without children, too. A small policy can help cover funeral expenses should premature death strike. This can ease the financial burden on siblings, older parents and possibly even friends would be then be responsible for funeral arrangements.
The Benefits of 20 Year Term Life
For many people, term life insurance is a great option. Term life insurance policies have a set time limit for activity.
For instance, a 10 year policy is valid for 120 months., as long as the payor maintains the premiums. If you pass away within the time period, your family (or whoever you designate) is awarded benefits.
The three most common types of term life policies are 10, 20 and 30 year policies, though you can get them in as short as one year.
Term policies have many advantages:
- Typically, monthly payments are lower than other types of policies, like universal or whole.
- The policies are usually very easy to understand and straight-forward–there are level premiums and level death benefits.
- The death benefit payout not only skips probate but is tax free.
Perhaps the biggest benefit is the ability to lock in low cost, level premium rates. This is especially true if you’re relatively young and healthy. Costs won’t increase over time, so you can stay ahead of inflation.
A 20 year term life policy allows you to plan your payments for 240 months, with no unexpected increases.
How Are These Rates Calculated? (Plus Sample Price Chart)
Insurance rates are determined based on a few factors specific to the applicant.
The application holds mainly health and lifestyle questions. Providers look at your age, gender, lifestyle, past medical conditions, present medical conditions and more.
In general, the healthier you are, the lower your rates will be, and the younger you are, the cheaper your rates will be, too.
This is why a 20- or even 30-year policy can be a great deal. You’ll pay the same premiums each month even if your health changes during the upcoming decades.
If you want to purchase life insurance after a health problems already occurs, premiums will likely be higher.
But, assuming you’re healthy, let’s take a quick look at what rates look like right now. The follow chart is for a 36-year old male, who uses no tobacco related products, and is looking for $250,000 in coverage.
| Company | Monthly | Annually |
|---|---|---|
| Protective | $14.41 | $167.50 |
| Lincoln | $14.66 | $167.50 |
| AIG | $14.62 | $169.00 |
| Banner | $14.90 | $173.27 |
| Principal | $15.16 | $173.28 |
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When Is A 20 Year Term Life NOT An Option?
Term life insurance is useful for a lot of people, but it’s not always the best option in a few situations.
Term life isn’t typically used for charitable giving or estate planning. This is because term policies would not payout if you outlived the policy, and long term financial planning doesn’t pair well with term.
Another situation might be if you are already a certain age, where a 20 year option isn’t really available from the carriers themselves.
You may have options like Term-to-90, Term-to-95, or other guaranteed universal life options, but the rates for these go up very quickly.
After the Term Limit Expires
When your policy expires, there’s really no need to do anything if you no longer want life insurance. If you want to renew, most providers will let you renew on an annual basis.
The renewal price will be much, much higher than the previous policy premiums, however. The new rates beyond the 20 year time limit can be double, or more.
You do have a couple options, though:
- Keep the policy and pay the high rates (usually only advised if death is probably within a certain time frame where keeping the policy would be a smart leverage)
- Convert the policy in whole or part (though the cost per thousand rises and is determined on current age, there’s no further underwriting so you can stay covered regardless of a change in health)
- Let the policy lapse (fine if you no longer need coverage.
How Much Life Insurance Do I Need?
When shopping for life insurance, you want to consider two main options:
- The amount of payout
- The length of the term
These two have a high factor in what premium you’ll pay, with the next being age and gender.
Now, you’ll want to consider your beneficiaries. Who are they? How old are they? If you have young children, you might need to provide for 18+ years of financial support. If you’re providing for a spouse who is able to work, the amount of benefits can probably be lower.
There is a formula to help you figure out an appropriate payout amount. Take your yearly income and multiply that by 7 to 12.
The two resulting numbers will show you a general range for payouts where your family could draw from the payout benefits over a long period of time as if you were still providing the income yourself.
Is 20 Year Term Life Insurance for You?
Even if you’re young and healthy, an accident can leave your family in a tough position financially. This is especially true if you have young children.
By purchasing a 20 year plan, you’ll be able to lock in a reasonable, level rate that won’t grow over time. You’ll also gain peace of mind knowing that your family’s future is secure.
There are very few people it would not benefit from some form of life insurance, and no one can be sure what will happen to them from one day to the next.
While ordinary life insurance policies, also called whole life, may be too expensive for many younger people, term life insurance offers people the ability to take care of their families for a very low, affordable monthly premium.
Take a moment to get a free quote from this page, and you’ll see your rates from more than 40 carriers on the following page.
