When you consider a life insurance contract, you're displaying a powerful commitment to protecting your family no matter what may come.
How much life insurance you need based on life stage
To best tailor your life insurance contract, view your term life insurance needs through the lens of your current family circumstances. Start by considering what your family would need to have covered. Typically, this includes funeral expenses, paying off debt and replacing your income.
Some people start with a figure that's 10 times their annual salary. But let's look at why you might adjust those numbers based on your age, situation and family profile.
If you're a young adult
Young adulthood is generally the
Plus, being young doesn't mean that people don't depend on you. Whether you're currently single, part of a two-income couple without kids or caring for parents or other relatives, you'll want these family members to receive some assistance if something happens to you.
If you're a parent of young children
The years with young children can warrant high expenses, like buying a house in a good school district or paying for childcare. Knowing your family depends on your income can motivate you to seek term life insurance coverage that matches how long you expect these expenses to last.
You'll want to think through what kinds of debts you'd like the contract to cover and what level of income replacement would help your spouse and children go on without you. You can use a
If you're a parent of teens and/or an empty nester
As your children grow into young adults, it's wise to maintain life insurance protection. You may need a plan for how your family would cover the mortgage or pay for your child's college education if something happened to you. Many people in this in-between time haven't yet retired and are still depending on their earnings to support them. Having term or other life insurance coverage for as long as you plan to work can help protect your family in the event you pass away.
Empty nesters also sometimes choose to support their children financially, such as with a down payment on a home. If you want this kind of support to be available for your child, a term life insurance contract is a cost-effective way to create financial protection for your family's near-future needs.
If you're retired
Many people who reach
However, there are limits on the use of term coverage. For instance, the oldest issue age for a 10-year term contract is age 75; for a 20-year term, it's 65. For this reason, many people who are approaching or in retirement choose to convert term insurance to permanent or buy permanent for the first time since permanent life insurance can offer a death benefit no matter how long you live.
If you've had term life insurance for a while, your contract may need some updates. You may be reaching the end of the initial contract you took out when you were younger and want to renew it. Or you might explore
Not sure if you need life insurance?
How different term lengths can meet your life insurance needs
While considering your life stage could give you a sense of how much coverage you need, you also need to decide how long you want that coverage to last. In most cases, longer contracts come with a higher monthly premium, so finding the right mix of affordability and coverage is wise. One consideration is that you only have to be evaluated for eligibility at the start of a term, so choosing a higher premium for 30 years would save you from having to be reevaluated for a new contract if you chose a shorter term instead.
However, it's most important to have life insurance that's the right amount—even if it means you need to purchase a shorter contract to start with.
Keep these factors in mind as you explore the different
10-year life insurance contracts
These contracts are great for parents of schoolchildren who want life insurance coverage until their children are adults or out of college. They're also often a smart choice for people with less than 10 years before their planned retirement as a way of protecting earned income. In both cases, the strategy is to buy the length of term insurance that would last you until you reach a certain short-term milestone. A 10-year term is also one of the most affordable options for life insurance, helping you buy enough to cover your present needs, with the possibility of getting a different contract down the road when you have more budget wiggle room.
15-year life insurance contracts
These contracts balance affordability with coverage over a longer time horizon, which makes them nice options for locking in a low rate on a contract. If you're not quite sure what you'll need to cover in the future, this medium-term contract provides protection in case of the unexpected.
20-year life insurance contracts
One of the most common time horizons for term life insurance is 20 years. It's particularly nice for lasting through most of your dependents' childhoods or providing coverage if you're not exactly sure what your retirement will look like in a decade or two. If you're hoping to cover the remaining stretch of long-term loans to ensure they don't burden your family, this also can be a useful contract length.
30-year life insurance contracts
These contracts let you lock in an excellent rate when you're younger that will last for decades to come. They'll be more expensive upfront but less costly than getting three consecutive 10-year term policies. Buying shorter-term policies also requires going through underwriting each time a new contract is created—with a 30-year term, you'll only go through the eligibility process once.
Your family's life insurance needs can change over time
It's worth it to discover which options balance your current financial responsibility with a long-term view of protecting your family from financial concerns. A