How long term insurance should last depends on the unique needs of your family as well as your long-term financial goals. In this post, we’ll show you how to determine your term insurance needs and the easiest way to get term life insurance quotes.
How long can term life insurance last?
Term life insurance is often sold in lengths of 10, 15, 20, 25, 30, 35, or 40 years. This duration of time is the “term”. Once the term is over, your coverage terminates.
How long should my term be?
The length of the term insurance policy that’s right for your family depends on your short and long-term financial goals. Let’s take a look.
Goal #1: Income Replacement
Term length suggestion: coverage until retirement age.
Income replacement is typically the primary reason why people buy a term life insurance policy.
Ideally, your term life insurance policy is inforce during your working years and expires once you reach retirement age. Should you die unexpectedly during those prime earning years, the life insurance policy replaces the income you were providing to your family.
Many financial advisors recommend purchasing coverage that is ten times the equivalent of your current income. This may be too much or too little term insurance, depending on your individual circumstances—your coverage needs are based on what you want for your family.
Does your partner have special needs or a disability?
If your partner has special needs or a disability which makes it difficult or impossible for them to work, then you’ll need to purchase coverage sufficient to replace your income and pay for the extra care—such as a home health aide and/or therapies—that they require. If they will require care throughout their lives, you may want to investigate whole life insurance options as well.
Do you have children or other dependents?
If you have children or other dependents, in addition to providing for their primary care, you will also want to provide funds to pay for the services that you may have provided, such as childcare.
Goal #2: Long-Term Financial Support for Loved Ones
Term length suggestion: longest term you can afford.
Another important part of deciding how much term insurance makes sense for your family is to decide what type of support that you want to provide for your loved ones.
Here are some things to think about.
Do you want to contribute to, or pay, the costs of your children’s college education?
If you are planning to help pay for your children’s college education, then it’s wise to keep in mind that the average cost of college tuition has risen steadily over the past 20 years.
If your children are young, they may face in-state tuition as high as $40,000 per year in just 10 years. If you want to protect your children from the burden of loans (which the majority of students require), then allowing for a significant rise in college costs is essential in determining the amount of coverage that you wish to purchase.
Will you provide for your children after they enter the workforce?
In addition to providing for your children’s care when they are still minors, you may also decide that you want to help them out financially when they become independent. Here are a few questions to think about:
- Do I want to help pay for my children’s first home?
- Will I help my children as they graduate from college and become established in their careers?
- Do I plan to leave a trust for my grandchildren?
Do you plan to provide support to your partner, or an elderly parent or relative during their retirement?
If you planned to help your partner or an elderly parent financially in their golden years or if they require full-time or hospice care, then this expense should also be included when you look at life insurance quotes.
» Learn more: Helping Your Aging Parents with Their Finances
Goal #3: Debt Repayment
Term length suggestion: equal to or greater than longest financial obligation.
If you have debt that you don’t want your family to have to pay after you’re gone, then you should add these amounts to your term insurance needs estimate.
Examples of debt that you might want to repay include:
- Car loans
- Credit card debt
- Private student loans
- Business debts that you personally guaranteed
- Healthcare bills
Your term length should last as long as your longest term financial obligation. So, if your mortgage loan is a 30-year term then you should choose a life insurance policy with a 30-year term.
These goals aren’t mutually exclusive. Depending on your family’s needs, all of these goals may be included in your financial plan.
What are common term insurance lengths?
Depending on your age, you can choose a term length between 10 and 40 years.
Here are some examples of instances where different terms may make sense:
- If your children will enter college in a few years and you want to protect them from having to take on student loan debt if you pass away.
- If you are a few years from retirement and you want to provide security for your partner’s retirement years.
- Newlyweds or new parents that want to protect their growing family.
- If you are a young family and you wish to safeguard your children’s financial future until they become independent.
- If you want to protect your family’s estate from long-term business debt that you personally guaranteed.
- If you don’t yet have children but plan to.
- If you plan to pay off a newer mortgage should you pass away.
- If you want to leave funds to pay for your young grandchildren’s college education.
- If you’re young and want coverage to last until you’re in your retirement years.
- If you’ve been thinking about permanent life insurance but it’s out of your budget.
- If you have debt that may take awhile to pay off and don’t want to leave any behind to your family.
Of course, there are many different circumstances that may arise that make it necessary to change the amount of coverage that you currently have. Thankfully, with term insurance, you have a number of options to make sure that you always have the protection that you need to keep your family secure.
See what you’d pay for life insurance
What are my term insurance options?
There’s no rule that says you can only own one individual life insurance policy. Owning more than one policy, each with different term lengths is called laddering, or layering.
In fact, if you have multiple goals you wish to cover with term life insurance, it may be more budget-friendly to buy more than one.
» Learn more: Laddering Multiple Life Insurance Policies
For example, say your largest debt is your mortgage. The loan balance is for $250,000 and it’s a 15-year term. Taking this into consideration, you probably only need a 15-year term policy, right?
Well, let’s also say you have three children ages nine months, two years, and three years. You and your spouse plan on paying for their college tuition. Your youngest won’t graduate college for at least 21 years.
So, let’s think about this. You know you want protection of at least $250,000 for 15 years (the mortgage). And according to the Education Data Initiative, the average cost of a public four-year in-state college in the U.S. is $35,331 per student per year (including tuition, books, supplies, and daily living expenses).
Sending three children to college to obtain their bachelor’s degrees will cost approximately $450,000 total. You’ll want this amount of protection for at least 20 years since your youngest is less than one.
You could purchase one policy with a coverage amount of $700,000 and term length of 25 years OR you could purchase two policies—one with a coverage amount of $250,000 and term length of 15 years and a second one with a coverage amount of $450,000 and term length of 25 years.
Consider the screenshots below. They are quotes for a healthy, non-smoking, 40-year-old male.
Option 1: One Policy – $700,000 Life Insurance Policy with a 25-Year Term
Option 2: Laddering Two Policies – $250,000 Life Insurance Policy with a 15-Year Term and $450,000 Life Insurance Policy with a 25-Year Term
As you can see from the screenshots, laddering the two policies would save you a few dollars each month. And after 15 years, you really save money each month.
Option 1: Pay $55.81 per month for 25 years.
Option 2: Pay $51.60 per month for 15 years, then $38.66 per month for remaining 10 years.
If you went with Option 2 to ladder the policies, after 15 years, the first policy would expire and you would no longer be paying for coverage you don’t need since your mortgage is now paid off. But you would still have the back up 25-year term policy to financially protect your family for another 10 years.
How much term insurance do I need?
When buying life insurance, you have to decide how long it should last and how much coverage to buy. The answer to how much term insurance you will need depends on your vision of your family’s future. Your long-term goals may change as time goes by.
It’s still wise to answer a few important questions about your family’s current and planned expenses when determining how much insurance you should purchase. Here are a few questions to help you get started.
What are my fixed monthly household expenses?
These may include:
- Mortgage or rent payments
- Loan payments (such as student loans at a fixed interest rate)
- Health insurance premiums
- Vehicle insurance premiums
- Car payments
- Membership fees (fitness clubs, etc)
- Children’s school fees and expenses
How much are my variable household expenses?
These will include:
- Credit card debt
- Average transportation costs (vehicle fuel, public transportation passes)
- Clothing and incidental purchases
In addition to the above, there may be some one-time (or infrequent) large expenses that may be a part of your short or long-term financial plan. These may include:
- Renovating your home
- Purchasing a new or second home
- Buying a new vehicle
- Contributing to a retirement fund
- Creating a trust fund for a child or other family member
- Starting a new business
Certainly, you don’t have to have precise amounts for all of the items above, but it is good to have some ballpark figures in mind as you think about how much term insurance coverage you will need to secure your family’s future.
» Calculate: Life insurance needs calculator
Another important consideration when purchasing term insurance is your current budget.
How much life insurance can you afford?
Term life insurance is ideal for most individuals because it can be customized to fit most budgets. For example, if you want a 30-year term policy with a coverage amount of $750,000, but don’t believe you can afford to keep up with the premiums long-term, then consider instead a smaller coverage amount or shorter term.
Consider the options below. The quotes are for a healthy, non-smoking male applicant who is 40 years old.
Option 1: $750,000 Life Insurance with a 30-Year Term
Option 2: $750,000 Life Insurance with a 20-Year Term
Option 3: $500,000 Life Insurance with a 30-Year Term
If you’re looking to lower your premium costs, which option do you choose? Lower the coverage amount or shorten the term? The right option really depends on your situation.
For example, if your mortgage loan is a 15-year term and your children are over the age of 10, then going with the 20-year term over a 30-year term is a logical choice. On the other side of the spectrum, if your children are still in diapers, then lowering the coverage amount and sticking with the 30-year term is probably the wiser choice.
Buy what you can afford. Some life insurance is better than no life insurance at all.
What if I need more life insurance?
At the end of your term, coverage will end and your payments to the insurance company will be complete. If you outlive your term life insurance policy, the money you have put in, will stay with the insurance company.
However, if your coverage is ending soon and you realize you need coverage to continue, you have some options. You can renew the term, convert it into a permanent policy, or you can choose to buy a new policy if you’re still insurable.
Learn more about your options here: What Happens If I Don’t Die While My Life Insurance Policy Is Inforce?
Will I qualify for affordable life insurance?
The success of your application and the amount you will pay in premiums depends on a number of factors. These include:
- Employment (if you are in a dangerous profession, such as working in construction, your premiums will be higher)
- Personal and familial medical history (if you have survived a catastrophic illness, or have a family history of serious diseases, then you may pay more in premiums)
- Current health
- Smoking status
- Driving status (a record of consistently unsafe driving will impact your premiums)
- Hobbies (if you love cliff-diving or other risky hobbies, expect an elevated premium)
- Frequent international travel—such as for work or volunteering that involves traveling to areas that are listed as potentially dangerous by the State Department—will likely make your premiums higher than average.
Don’t let the list above intimidate you. Insurance companies need this information to calculate an estimate of your mortality risk, but don’t hesitate to apply because you have a few strikes against you. Quotacy works with all types of applicants who may face challenges in finding affordable life insurance.
» Compare: Term life insurance quotes
Note: Life insurance quotes used in this article accurate as of June 22, 2022. These are only estimates and your life insurance costs may be higher or lower.
Watch the Term Life Insurance Duration Video
About the writer
Natasha Cornelius, CLU
Senior Editor and Life Insurance Expert
Natasha Cornelius, CLU, is a writer, editor, and life insurance researcher for Quotacy.com where her goal is to make life insurance more transparent and easier to understand. She has been in the life insurance industry since 2010 and has been writing about life insurance since 2014. Natasha earned her Chartered Life Underwriter designation in 2022. She is also co-host of Quotacy’s YouTube series. Connect with her on LinkedIn.