Twenty Year Term Life Insurance. Pretty hot stuff. Inexpensive financial protection to have. Yes, it fills a big gap for many different American life insurance needs. Is it the answer to everyone’s prayers? Probably not, but it has a respectable place in the portfolio of many families raising kids that is for sure.
While 20 Year Term is a popular product, it is sometimes purposed for needs that it does not suit so well. Term life insurance is often sold because it is “cheap” and is easy to market or “sell.”
As a life insurance consumer, just make sure you are not comprising your needs for appropriate coverage over price. A change in health later in life and you have a big problem. Worse yet, what if you planned on using it for end of life expenses and the policy expired do to the limitations of age?
So in this post, I will tip you off when 20 year term life insurance might be the answer. You will get the real scoop on this popular life insurance product. Included are:
- The upsides and downsides of 20 year term life insurance
- Common mistakes made by many consumers that you should avoid
- How to get the lowest possible cost for life insurance coverage
As you shop for term life insurance, be sure to carefully consider all the information about the different types of term life insurance. This is the only way to make darn sure that your purchase will get the job done right and protect your loved ones from financial devastation.
What Term of Life of Insurance Do I Need…The Different Term Lengths
As a shopper for life insurance, you may have already read on either this site or another, about the different term life insurance products. Specifically, how term life insurance is typically sold in 5 year, 10 year and the most common 20 and 30 year lengths. You may have asked yourself the question, what term of life insurance should I buy?
Sometimes it isn’t quite as simple as purchasing a 30 year term life insurance policy to cover a 30 mortgage and various other debts. If you have a family complete with kids for example, there is more to consider. What would happen if financial support was cut off from Mom or Dad due to the unthinkable?
Both parents, regardless of “income” should be covered. Are your kids going to college? If so, how far in the future is that? What is your debt like? When will it be paid off? Where is your career and/or your spouse’s headed?
Will you need as much life insurance in 30 years as you do now? Keep in mind that the mortgage amount will be declining during those years for most people while many also expect their income to increase.
Factoring in items like this helps paint a clear picture of how long you will need as well as the appropriate amount of coverage. Sometimes you are better to blend multiple life insurance policies to cover these costs. Maybe you have a 30 mortgage with 19 years remaining but your kids may complete college inside 10 years. A 20 year term of life insurance to cover the remaining mortgage and additional 10 year term life policy will cover those costs, protect your spouse and kids from financial damage. It also keeps you from overpaying for life insurance by simply buying a larger, 20 year policy. This example assumes that your finances are in good order and do not have a lot of outstanding debt beyond the mortgage. Additional debt such as loans or credit cards could be another factor to figure into your term coverage.
The term of life insurance you need is based on your individual situation. It sometimes requires a blended approach like the fictitious example above. This will also save you money versus buying one larger, longer term life policy which may be unnecessary.
A key point to remember about these products is the difference in premiums as well as the specific benefits included in the actual policy. It does vary.
Life insurance can be very personal in how it is used. To avoid any confusion though, let’s continue with a term length of 20 years.
What is 20 Year Term Life Insurance?
First of all, any kind of term life insurance is temporary. It “terminates” after a defined period of time in the policy. It has no cash value build up inside of it. There is no financial gain unless death of the insured were to happen.
So, 20 year term is simply temporary or “pure” life insurance for 20 years. Upon the completion of that period, the coverage expires and the individual will no longer have coverage at the premium from 20 years ago. The term is over. You have “rented” financial protection during that time for an agreed upon price.
20 year term life insurance is a good place to start as you are establishing yourself, even as an individual. As you age you can adjust you coverage to make sure the coverage is there to protect your family or business interests from being upset financially or even severely.
Understand that there is rarely a better time than the present to get coverage in force. Life insurance does not go down in price as you age, period. Health can change and accidents occur. Your age and health are your biggest assets in obtaining your lowest cost term life insurance, period. Attempting to save money for another year or two and buying down the road will just raise your monthly premium and risk a negative event in your life such as a medical diagnosis of a health condition or even worse yet!!
Folks, I am going to make a strong statement here…
Not having life insurance is not a respectable decision while you have dependents, a spouse or debts to payoff if you do not have the cash resources to cover them!!
If your family has no debt or very deep pockets and can afford the loss of an adult breadwinner, caregiver/homemaker, that might be a different story. Economic report of the average savings across the US versus the debts that are owed clearly illustrate the need for term life ins to protect our love ones from the financial crater we may leave them with.
The vast majority of us have plenty things we waste money on. I believe my family spends way too much money dining out for example. I’m a good cook by the way!! Cutting out just one evening a month out would pay for my term life insurance. Keep in mind I took it out when I was quite a bit younger.
Term life insurance is very affordable, even if you have a health condition. We just need to make a small monthly sacrifice to protect our families first. I know plenty of people that drop money on Starbucks… like it grows on trees!!
Personally, I carry two 20 year term life policies to protect my family. The are staggered and with 2 different life insurance companies. That is what suits my concerns and needs the best. I do practice what I preach.
It is a terrible thing when someone unexpectedly passes on but it is even worse when a grieving family is left behind without life insurance. Hopes and dreams are ruined because of car wrecks and cancer all the time. Does not matter how old you are either. Plenty of death due to cancer even in the 30’s and 40’s. Just had a good friend, age 50 with a younger wife in her early forties, die of breast cancer. He is left with 4 kids with the youngest, age 6.
Make sure they, your family can carry on with life financially. Term life insurance is often the answer.
Sorry for the rant by the way…
I am a firm believer in doing the right thing for your loved ones.
Now, let’s talk about the difference in premiums among the different term periods commonly available.
As mentioned earlier, term life insurance is just temporary coverage. With 20 year term life insurance, a guaranteed level policy will have the same premium locked in for 20 years. Be aware that I said “guaranteed level.” There are many policies issued that are term life insurance, but the rates go up over time. Globe Life is famous for that. AARP is joining the ranks as well. Very cheap initially and become expensive to own long term.
So, a 30 year level term policy with guaranteed level premiums would lock you in at a premium rate for 30 years…
What Happens at the End of Each Term?
At the end of a 20 year term policy, the guaranteed level premium will “terminate” (expire). Your premiums will jump drastically and continue to go up sharply each year (annually) after that. With the premiums being very high outside of the “term”, most people will drop them because they feel as though they are being overcharged.
You must understand that after a certain number of years, you are a larger risk to insure, especially if 20 or 30 years have gone by. Your best health is realistically behind you.
At this point, you may have an option to change your coverage to permanent life insurance.
Whole Life Insurance has been the traditional mainstay for years, but I would like to point out another option.
That option would be Guaranteed Universal Life Insurance. This is a permanent form of life insurance that is much more affordable and can cover you to age 121 more affordably than whole life insurance.
With that said, it is very important that you know what options to convert are built into any term life insurance product. Whether is 10, 20 or 30 year term life insurance… Do not put your John Hancock on the “X” until you know your options contained in the term life policy. In other words, have an understanding of the “fine print.”
Myself…I would not buy any term life insurance policy from any life insurer with limited provisions for conversion. Does not matter if it is a bit cheaper up front. 20 year term life insurance is low cost to start with and much cheaper long term to have good options to convert.
If you don’t want to take my free advice here and years down the road need or want to convert, the only option may be the more expensive whole life insurance. At that point, you may be thinking “wow, I can’t afford that or I don’t want to afford that.” Now your shopping for a new term life insurance policy. Your also much older and your health has changed due to the effects of aging. You might not be able to even qualify for something affordable at that point.
That is why it is critical to know what you are buying.
I have been around the block more than once and have seen the health of many of my policyholders change drastically. Working with a lot of seniors in what I do, I also hear lots of stories of how their life changed over the years.
In my experience, there is no substitute for having your ducks in a row. Flying by the seat of your pants usually results in a huge layout of cash or no life insurance at all.
If you are curious about universal life (UL) insurance give us a call for a quote. We typically only recommend guaranteed universal life insurance with some exceptions. Standard UL and the like can expire prematurely if it is not carefully monitored. It is a more complex product. Guaranteed universal life insurance (GUL) offers guaranteed level premiums, level death benefits and will not expire unless you do not pay your premiums. It offers a “no-lapse” guarantee, hence guaranteed UL. Coverage is just like term life insurance, but is permanent in nature, covering you for life. Best of both worlds. Very affordable.
The Upside of 20 Year Term Life Insurance
It fits well with the needs of many people, making it “practical” in a sense. It is a good place to start anyway.
Most people who purchase 20 year term life insurance buy it to cover their kids into adulthood when the policy guaranteed rate terminates. Where will you be personally in 10, 15 or even 20 years?
We hope that you will be in a better financial position because your occupation has allowed your advancement and ability to pay down debt such as your mortgage, cars, education debts etc. Those 20 years are when most families are most vulnerable for financial devastation. 20 year term will be there to mitigate these high risk years. If you need to continue coverage, you have the options provided by the policy and you will be more likely better positioned financially to afford the cost of permanent insurance.
Low Cost…Its Affordability
20 year term life insurance is cheaper than 30 year per month because the insurance company is not taking as much risk. While 10 year term in less costly than 20, it is not usually recommended as a first policy as you very well may covering your risk for the long term.
Contractually Guaranteed Years of No Worries
I think we can all sleep better at night knowing that if the unthinkable were to happen that our families financial needs would be met. While term life insurance is an intangible, little else can provide the financial security better in our absence then life insurance. This is something that is difficult to put a price tag on.
Remember, you have a fixed premium for 20 years that simply won’t go up for 20 years. No matter what happens with your health, that premium stays the same for the full term. Good term life insurance policies have guaranteed level premiums for the entire term.
Remember that the peace of mind comes from making sure you are properly insured. Never underinsure. Debts you may have can still take a serious toll on the family as the policy death benefits may be not be adequate.
If you or another insured does not die during the “term,” a good policy will allow a conversion to Guaranteed Universal Life with no evidence of insurability. Just remember to heed my advice from above and convert the policy before the “term” ends.
My recommendation… do not buy a policy that does not have a conversion option built into it. Even if an alternative is a few bucks cheaper. Conversion options a very important benefit. Any term life insurance policy we recommend is going to have a conversion option included in the policy.
The Downside of 20 Year Term Life Insurance
The premiums will skyrocket upward after expiration
Remember, with term life insurance that is guaranteed level, you’re buying a level premium for the term you select. In our example of 20 year term, you can expect rates to rise 5 to even 10 times the monthly premium you had paid during the term. Your rate was set to your health when you applied for the coverage, not at expiration.
Buying a new term life insurance policy after expiration will be much more costly
So after your 20 year term life insurance policy has run its course and you want to insure again
With 20 year term purchased at age 25, by age 45 when it expires and your health has slipped due to age, you can expect a new term policy to be double in cost.
Now that is a real bummer!!
It may not be a good option for someone in questionable or poor health
Insurance companies base their rates heavily on your overall health. If you have a serious medical condition, it might not be a good choice. Sometimes we see more favorable ratings for permanent policies such as a guaranteed universal life policy. Guaranteed universal life may be a more prudent decision with questionable health at the very least.
Term Life Insurance Quotes
You have likely noticed our term life ins quoting tool in the sidebar. We offer unlimited, free term life insurance quotes to help get you started in your quest for life insurance protection. For many people, they pay exactly what the instant quoter determined for them. Be mindful that while these they rates are up to date, you may or may not qualify for these rates or even cheapest a particular company at all. You see, the quoting tool has limited information on you. You are only giving it general info about you. If you selected the wrong health class and/or have a health condition, maybe your height to weight ratio is not in line with a particular insurer requirements, a family history of diseases, a blemished driving record…all of these factors skew an accurate term life insurance quote.
We can help you dial things in by speaking with us. The “best” company for you may not even be in the top 5 or 10 companies. Ultimately, your rate in determined by the “best company for you” after the underwriter has reviewed your case. A key point to keep in mind…not all insurers look at applicants the same way which greatly affects your premium. A good independent life insurance agent will be able to guide you towards the best company for you so you don’t get overcharged or declined and get the lowest, actual cost of coverage.
Don’t Cut Corners. The Stay At Home Spouse Must Be Insured As Well
We just talked briefly about obtaining a quote for life insurance. What is the biggest mistake couples make when purchasing life insurance? The assumption that the “breadwinner” is the only one that needs to have life insurance!! Wrong!! Don’t go there to save money. Married couples are a team, period. While the breadwinner is out bringing in the paycheck, the stay of home spouse is saving the family money by performing work as well. Cooking, cleaning, full time babysitter, running kids around to appointments or events, being the caregiver to sick children, paying the bills, shopping for groceries etc. This is daily routine. Folks, this is something that takes a lot of time and would cost an arm and a leg to cover without your spouse working at and on the home. Just investigate the cost of a live in nanny. Realize that they will not do all of the above either. If the unthinkable occurred, that is just a financial starting point you would have to offset somehow.
To put a financial value on a stay at home spouse, go to salary.com and use their calculator. You may be shocked at the truth. We all work hard in one way or another. Being a stay at home caregiver can be a thankless job sometimes. You don’t get a paycheck do you?
The writing is on the wall for us all. Cancer and car wrecks claim the lives of many youthful parents each year. Make sure you are being realistic about the financial value of your spouse at home. Life without them would be very difficult if you had to pick up on of their responsibilities wouldn’t it?
So, how do we move on and pay for the help we will need? I think you now understand now, if you did not already. Term life insurance can remove this risk. Don’t pinch pennies on the future of your family. More family dreams are destroyed by not having life insurance on both Mom and Dad…all to save less money than is spent on coffee at Starbucks each month!! If your still not sure about all this, read this article containing information provided by a TV station and AAA. There is a link at the top of the article to the actual news footage to review as well.
Do You Have Health Issues? We Can Help You Get Coverage
At Special Risk Life, we regularly see individuals who live with high risk medical issues such as diabetes. We’ve seen it all. We are here to help you get you a prompt approval at a rate the you can afford on what is best for you. Here are some simple tips to find your best rate on high risk life insurance.
Concluding The Best 20 Year Term
If you have any unanswered questions regarding term life ins or any other life insurance help… give us a call for assistance…800-598-6445. We are happy to answer your questions and provide some guidance. We can also help you sort out the term of life insurance that will be best suit your goals.
Hope this article helped you better understand term life insurance and in particular, the popular 20 year term life insurance product. Feel free to comment or provide suggestions below. Have a good day.