20 Year Term Life Insurance – Common Questions Answered
One of the most popular insurance policies that I sell is 20 year term life insurance. Why? Most likely it’s the balance between the reasonable length of the term and the very affordable cost. It just seems to often hit the mark for many of my clients. Let’s look into this further:
What is Term Life Insurance?
As discussed in my previous blog articles Term Life insurance is a lower-priced premium product. Coverage is for a specific number of years. The shorter the term means the lower the premium. When the initial term ends, the insurance company determines your annual renewable rate. Often, my clients will keep the policy just for the first term.
How is a 20 Year Term Life Insurance Rate Determined?
You can assume that the longer the term (number of years) for a term life insurance policy, the higher the premiums will cost. Since the probability of your death increases over a 20 year period (as opposed to just 5 or 10 years), the insurance company’s risk also rises as you continue to pay your low (and unchanging) premium for these 20 years. The 10 year term is lowest priced, the 30 year term costs the most, with the 20 year comfortably priced in between the two.
My clients often will purchase a 20 year term life insurance policy to protect a mortgage, or in this economy, to provide themselves with protection in the event of a job loss. If the balance of your mortgage is $125,000, in the event of your death, this policy will enable your spouse to handle the remainder of the mortgage.
Are Medical Exams necessary to buy a 20 Year Term Life Insurance Policy?
This depends on your current health, your age, if you’re a tobacco user, and how much you want to pay for the policy. Life insurance no medical exam may be necessary, but without one, the insurance company takes on more risk and will charge accordingly. If you know you’re healthy, it may make sense to have that exam when you apply in order to keep your cost down.
What should I do when the 20 Year Term Life Insurance Policy ends?
After twenty years, you’ll have a few decisions facing you. Some policies will let you convert to either a whole life or universal life. Insurance companies don’t require medical exams within your conversion period. You can pay for an annual renewable policy, but the price may be cost prohibitive. Or, consider a permanent final expense type of policy for end of life planning. Ultimately working with an independent broker to help you understand your right is the best move.