While many things can easily catch our attention these days and encourage life-long commitment, not all of them actually need it. Life insurance, while it can absolutely cover you for your entire life, is also highly customizable and can be set for a shorter term through term life insurance. Not sure how much term life insurance you should buy? We break down that below as well as some of the other most frequently asked questions surrounding term life insurance.
How Much Term Life Insurance Should I Buy?
Overall, you should always buy what you need to cover the debts, loved ones, and obligations you have in your life. You don’t necessarily need more than that, however, that still could depend on your situation.
If your goal for coverage is primarily focused on income replacement, term life insurance can be a great solution for that as well. In that case, your policy advisor will help you make the calculations necessary to properly replace your income with inflation factored in.
How Does a Term Life Insurance Policy Work?
Term life insurance could be considered much like a subscription service in that a term life insurance policy’s annual costs will be the same every year for the term period (e.g. 20 years). Once this period is completed, you can generally renew the policy, but it will be at a higher rate than when you signed up previously (since you will be older).
During the period you’ve selected for your policy, if you happen to pass away during that time, your beneficiaries will receive whatever coverage you’ve set up on your policy.
How Long a Period Should I Get for Term Life Insurance?
How Long a Period Should I Get for Term Life Insurance?This will highly depend on your preferences. For instance, it may make sense to get a shorter term for life insurance to cover a few of your major milestones now and then more comprehensive or extended coverage later when you have achieved even more or built a family.
Typically, periods for term life insurance can be renewed on a yearly basis, but some of the most common periods include:
- 10 years
- 15 years
- 20 years
- 30 years
What Happens If You Outlive Your Term Life Insurance Policy?
In two words: not much. Unless you decide to renew your policy it will expire and you will forgo any coverage you’ve been paying for. Unless you’ve purchased “return of premium” term life insurance, you won’t receive a refund for your premiums paid.
Once it expires, it can be a good idea to shop around for the life insurance policy that best matches your needs going forward.
How Much Does Term Life Insurance Cost?
Although there’s not a definitive answer to this since term life insurance policies are tailored to each individual, and will largely also depend on your coverage, we can offer a basic estimate.
For instance, for about $100,000 of coverage for a 20-year term, if you’re in your 30s, you can expect to pay approximately $15 per month. When deciding on a policy that works for you, it’s best to talk to a life insurance provider as they can help you find a policy that’s within your budget while getting as much coverage as possible for you.
Overall, term life insurance is especially ideal for young people as it offers a good level of financial protection for the milestones you’ve reached, but can also greatly benefit people later in life as well.