There are a lot of decisions that go into choosing the best life insurance policy for you. One of them is how long should your life insurance coverage last?
The options range between 10 years and for the rest of your life. Below, we’ll look at the length of coverage issue and provide tips on how to make the best choice for you.
How Long Should Your Life Insurance Coverage Last?
Let’s first talk about the different types of life insurance policies. There’s the term life insurance, one of the simplest types. It’s also one of the most affordable.
Term life insurance is ideal for most people who want to protect their family financially in case they pass away unexpectedly. There are different terms to choose from.
Typically, life insurance companies offer 10, 15, 20, or 30 year policies. If you pass away during the term of your choosing, the insurance company will send a check to your beneficiaries.
Then, there’s the permanent life insurance policy. This type of policy will provide lifetime coverage for you.
It is a more expensive option, yes. But lifetime coverage is worth it to most people. This means that no matter when you pass away, the contract is still in place. Your beneficiaries will still get your insurance claim.
Questions to Ask Yourself
When determining which policy length is best for your situation, there are some important questions to ask.
How old are your kids?
Many people purchase life insurance to make sure their kids are taken care of should the unthinkable happen. If your kids are very young, then you’ll want to take out a longer lasting policy. Figure you’ll want things covered to get your kids through college.
How much debt do you have and how long will it take to pay off?
Life insurance can help your loved ones pay off any debts you may have… mortgage, car, student loans, etc. If you have considerable debt and are near the beginning of a 30 year mortgage, then you should look into a longer term life insurance policy.
Without much debt and if you’re further along in paying off your mortgage, a shorter term policy can work for you.
How much do you have in savings?
Another common reason people take out life insurance is to pay off end of life expenses (like health care costs and funeral expenses). If you have enough money in savings to cover these expenses, then you don’t need life insurance coverage – no matter what the term length is.
How Does the Policy Term Affect Cost?
How much do these policies cost? Well, as you might imagine, the longer the term, the greater the cost.
The cost also depends on the amount of coverage you will get. It is a rule of thumb to have enough coverage that is equal to five to 10 times your annual salary.
Of course, you also need to take debts, assets, the size of your family, and other factors into consideration. The more coverage you want, the higher your premium will be.
The payout from your insurance policies are usually tax-free, so it is well-worth it to pay more monthly premiums than to skimp on coverage. Remember, you’re getting a life insurance policy to provide financial security for your loved ones in case something bad happens.
Life insurance payouts usually help cover for different expenses. This includes final expenses, mortgages, your children’s education, and more.