Right Life Insurance Term Length

Life insurance is among the most widely known financial planning tools today. There are plenty of reasons for its popularity – life insurance provides with a life cover, there are numerous plans on offer, and these plans can be customized as per one’s needs, making life insurance highly appealing to all.

However, the question is – What’s the ideal length of time to set your life insurance for? The truth is, the ideal length is different for each one of us.

Here’s a guide that can help you narrow down the right life insurance term length:

Who Needs a 30-Year Term Length?

A term length of 30-years can be an ideal choice for individuals who want to provide their dear ones with a financial safety net for an extended period of time. When you are young and healthy and have personal and financial milestones ahead of you, a longer duration will offer you the peace of mind throughout your life. Here’s who should opt for a 30-year term length:

  • Newlyweds
    Promising to share your whole life with your beloved is an exciting milestone in your life. However, along with the promises to protect, travel, and share joys and sorrows, comes the shared financial obligation that you have promised to look after.
    Having life insurance with 30-year length will give you the peace of mind in knowing that you have a back-up plan for the next 30 years while you and your spouse are busy building substantial savings for the future.

  • Bread Earners
    Primary bread earners should also consider a 30-year life insurance plan. Mainly because your near and dear ones rely on your income for their financial stability and you will want an insurance plan that lasts you at least until you retire. In case of any unfortunate happening, such as your untimely demise, the proceeds from your life insurance plan can help replace your income, making things easier for your family to carry on without you.

  • Homeowners
    Apart from the personal milestone like tying the knot, another significant milestone in one’s life is buying a dream home. While choosing the term of the mortgage, most people opt for a 30-year mortgage, thus, making a 30-year term length an excellent match.
    If you happen to pass away unexpectedly before the mortgage is paid off, the payout from your term life insurance plan could be utilized by your loved ones to pay off the mortgage and continue with a life that is free of any financial strains.

Who Needs a 20-Year Term Length?

For many individuals who are in their early to late 30s, a 20-year term life insurance plan is just enough to cover their family or to ensure that their home loan is paid in full. Here’s who should opt for a 20-year term length:

  • Parents of Young Children
    Term insurance becomes most important, especially when your bundle of joy arrives in this world. Therefore, if you have a young child, a term plan with 20-year duration will offer the required financial safety net, at least until your child is 20 years old.
    For those who want to offer more comprehensive protection, can opt for the 30-year term length. Whichever duration you choose, remember that term insurance is a must for young families looking to leave a lasting legacy.

  • Debt-Laden Individuals
    Unexpected demise of the bread earner is not only emotionally hard enough on a family, but can also cause huge financial strain, especially if there is an outstanding debt to repay. Whether it’s five more years for the student loan or 15 more years for payment of home loan EMIs, it’s wise to go for the best term insurance plan that can offer a layer of protection for any outstanding debts that you have.

  • Soon to Retire Individuals
    If you are close to retirement in the next 20 years, consider opting for a 20-year term which can provide the financial cushion until you reach that milestone. A 20-year term can be a robust option - it is cost-effective, will last until your children are grown, and can travel with you into retirement.

Who Needs a 10-Year Term Length?

It’s true that some personal and financial circumstances need you to have longer-term insurance– you are the breadwinner for your loved ones, you are at the beginning of your home loan EMIs, you have just tied the knot or are a new parent.

However, few situations, especially, the ones which are at the other end of the timeline, could benefit from a 10-year term of insurance.

  • Parents
    Parents of teenagers could benefit from 10-year term life insurance. In this case, term plan can provide coverage through your children’s college years or early adulthood.

  • Retiring Within A Decade
    Even when you are closer to retirement, a term plan can make a lot of sense. This is true when you still have some financial needs, however, your time horizon has shrunk all the way down to 10 years.

Whatever Length You Choose, You Are Making The Right Choice For Your Dear Ones

Several factors go into choosing the best life insurance plan for you and your family. Your budget, your financial goals, and family structure all ultimately play an important role in choosing the term length that best serves your needs.

Whatever length you choose, it’s important to keep in mind that life insurance is meant to provide for your family in your absence. Therefore, weigh all the factors before you make this most important decision of your life.