These days, people in America are living longer than ever before. In fact, U.S. life expectancy has been consistently rising since the 1960s; and today, it stands at 79 years of age on average. And as unbelievable as it may sound, some experts say that children born today could live to be as old as 120 or older!
An expansion of the typical life timeline presents some additional challenges for Americans who are trying to prepare for the future. It also impacts the purchase of life insurance, especially when it comes to the length of the policy terms. Given the fact that life expectancy is still growing, what is the ideal time period for term life insurance?
What Are Your Choices?
Generally, term life insurance policies are offered with timeframes of five-year increments that are typically 20 or 30 years. But the perfect length largely depends on the person buying the policy and his or her age, work situation, and number of dependents.
Until Your Kids Leave the Nest
Speaking of dependents, the expiration date of your next life insurance policy should be later than the year during which you expect all of your kids to be grown and living on their own. Keep in mind that it's becoming more common for children to remain in their parents' home well into their 20s (and sometimes their 30s).
Until Your Loans Are Repaid
In addition, be sure to obtain a life insurance policy with a term that is longer than the number of years you have remaining on your mortgage, personal loan, and/or private student loan. For example, if you have a 15-year term policy but don't expect to pay off your loan for 18 years, your family could be left with a large monthly payment if you were to pass away during that "uncovered" three-year window.
Until You Retire
Another rule of thumb is to maintain a life insurance policy for as long as you believe you will be working in order to have the ability to cover any income you might lose due to premature death. Not only does this provide protection in the event you don't have a policy offered by your employer, but it also allows you to buy another policy after you leave the workforce that accounts for your retirement plan income and savings.
Until You Get Healthier
If you think that your physical health might improve in the near future, it may be wise to purchase a policy with a shorter term (say, five years) in order to qualify for a better rate when your health improves. Situations where this may be relevant include:
- If you're planning on quitting smoking over the next few years
- If you're planning on losing weight and embracing a healthier lifestyle in the near future
- If you are sick but are confident that you will heal or get better after a few years
- If you work at a manual labor job but envision yourself moving into a sedentary management position later in your career
Don't Settle For Overpriced Life Insurance
Finally, there's the ever-present concern of affordability. Obviously, you don't want to break your budget paying for life insurance. Since shorter-termed policies have lower premiums than those with longer terms, purchasing only a five- or ten-year policy may be more financially prudent, especially for young adults who have just entered the workforce.
You don't want to pay too much for something you hope to remain unused for a very long time.
One budget-friendly alternative is known as annual renewable term life insurance, which generally comes with lower premiums than standard term life policies. This option, which is often attractive to Americans who are between jobs and/or pursuing a graduate degree, allows you to renew your life insurance each year. However, it's possible that the insurer could raise your rate upon renewal.
Find the Best Deal on Life Insurance
One last tip: it's important to shop for term life insurance the same way you would for any other significant purchase: by gathering multiple price quotes and choosing the product that best suits your needs. IntelliQuote can deliver premium quotes to your inbox within minutes so you can compare various policies side by side. So why not request a quote from IntelliQuote today? After all, you may be destined to live longer than you planned.