I get it! There are a lot more pleasant things to do than shop for life insurance policies. However, here you are, going through the process and doing your due diligence because you understand the importance of the death benefit protection life insurance provides and want to protect your family or your business. Of course, you want to do it in the most cost-effective way possible. In this article, I will help put this process of buying life insurance behind you by explaining 10 Reasons: I have a majority of my healthy insurance customers, who are under 40 years old, purchase simple 10-year term life insurance to take care of their life insurance needs.
Fast and Free 10-Year Term Life Insurance Quotes
1) 10 Year Term Life insurance provides the most death benefit protection per dollar of premium spent.
Let me just lay it out for you. A $1,000,000 10 year term-life insurance policy on the life of a healthy 35-year-old male non-smoker with an impeccable medical history costs as little as $19.55 per month! You read that right – a life insurance premium of ONLY $19.55 month! How do I know? This is the quote I get from Transamerica in our life insurance quote tool, which you can check out after you read this article. $19.55 per month is an incredibly low amount to pay for the peace of mind that comes from knowing your family will have financial support if something happens to the breadwinner.
And if you are looking for even higher protection, the same 35-year-old guy could purchase a $2,000,000 policy for just $36.55 per month! This may sound like a lot of insurance, but I can tell you as a financial advisor, people under 40 require millions of dollars of coverage to replace their income if they should die. This is what life insurance is designed for – to make sure that if something happens, a family or a business can continue living without money being a worry.
One of my tenets for making financial decisions is “leverage,” and 10-year term life insurance lets you leverage its lower premiums to get the most term-life coverage.
2) A 10-Year Term Life Insurance Can Often Continue Until Age 95
At the time of this writing, I am 50 years old and feel in terrific health. But I had some health issues back in 2016, and they have made me 100% uninsurable for the rest of my life. Therefore, the life insurance I had in place before I had my health problems will be all I will ever get as an individual (Note: If I ever join a “group” – “get a job” I can likely get some through my employer if it is an offered benefit. Know that group rates typically have higher premiums for healthy individuals than buying a policy outright.)
What kind of life insurance coverage did I buy? You got it – mostly 10-year term. Why? Because it was the cheapest life insurance option and I know I can continue my coverage once the term ends until I am 95 years old (or “convert it,” which I will discuss later)
For a policy, “the term” is the period during which the premium remains level for the consumer. For the life insurance company, they look at the cost of insuring the person every year. Once the term is over, the insurance premium you will pay on the policy is the cost required to insure you AT YOUR CURRENT ATTAINED AGE. This means the premium will increase each year you keep the policy. If it is your only option and you need insurance, that may be ok in the big scheme of things.
The other option (if you still need insurance and are healthy enough) is to take out a new 10-year policy.
I have heard too many life agents tell prospective customers they NEED to buy a 20-year term to lock in the rate and ensure they can keep a policy in the future. This is only partially true. The “term” locks in the rate for a specific period, but the policy can be renewed annually and provides lifetime coverage.
3) Your 10-Year Term Life Insurance Can Be Replaced Using Other Life Insurance Companies
Here is a statistic you will be interested to know…
According to LIMRA, the average life insurance policy lasts less than 4 years! I am not saying you are going to keep your policy for just a couple of years, but if you do, then buying a 20 or 30-year term policy and paying more premium today so you can “lock in the rate” for that long would be a complete waste of money.
It isn’t surprising that term life policies don’t stay in force that long. The noble reasons you may hear about are that people’s lives and needs change over time. You know, the idea that they purchased a life insurance policy when their kids were young with the intention of having it until they graduated college, but then didn’t need it as much.
Well, from experience, I can tell you that a lot of policies lapse because “people don’t think they will use it, so paying the premium seems like a waste of money.” The Old “I haven’t died yet and don’t plan on dying” excuse.
Listen, you are looking to buy life insurance right now because something in your life has made you realize the importance of coverage for your family or business, and you are willing to spend money for that peace of mind. This need isn’t likely to go away, though your desire for that peace of mind might. If someone dies and the support they provide vanishes, the people left behind struggle. Life insurance death benefits prevent that.
Therefore, I believe that having the lower premium requirements of a 10-year term will prevent these lapses. $20 a month coming is much different from $50 a month today for the same coverage.
Once you have the life insurance coverage in place, you can replace it with a policy from another company in the future and have those rates locked in for another 10 years if you want. Yes, you will be older, but you would have 5-7 years of lower payments with this original policy.
There are many reasons someone might need to replace their life insurance policy, and many different life insurance companies to choose from.
The important thing is to make sure you are getting the coverage you need at a price you can afford.
4) The Lower Premium Leave Money For Other Coverage
Here are the realities of life. If you are in excellent health -even if you have a few medical issues – the odds are you will not die before you are 60 years old! Yes, there is a chance, but the odds say you won’t. This is why term life insurance rates are so low. You buy life insurance because the odds are low that it will happen, but the consequences to others if it does are astronomical.
When someone dies who is young, it is always a tragedy. It is usually a freak accident or illness that ends up taking away their life. However, many times those freak accidents or illnesses don’t take their life but cause other problems that can cause financial hardship.
Buying cheap life insurance from one of the many highly rated life insurance providers in the market leaves you with more money to address other needs. You can see my “castle” in the picture beside this paragraph. On it, you’ll notice life insurance is just one part of the foundation. There is also health insurance, disability income replacement, long-term care, and home and auto.
A home or business’s protection portfolio is only as strong as its weakest link. Spending less on death benefit protection gives you more money to put a plan in place to address these other areas, too.
5) Spending Less on Life Insurance Equals Less Guilt
Insurance is a crazy product because you buy it in the hope you never have to use it. Instead, you have insurance in case you need it.
Life insurance is even crazier because when you buy life insurance on your own life, it’s to provide a death benefit for your beneficiaries. You won’t be around to see its impact on those the proceeds help.
I know I hate spending money when I feel I am wasting it. I mentioned earlier that people don’t plan on dying, and I am willing to bet you aren’t either. So doesn’t it make sense to take the cheaper life insurance option for the most death benefit coverage possible? Of course it does.
6) Less Premium Today Equals Faster Decisions
I will say this again if you are healthy, the odds say you aren’t going to die tomorrow. The problem is if you do, and people depend on your income, then not having insurance in place will make a horrible situation a million times worse.
I don’t know about you, but when I want something that doesn’t cost much, I just get it. As it starts to cost more, I delay longer to make sure I am not wasting my money.
7) 10-Year Term Life Insurance Can Be Converted to Permanent Life Insurance
You may be talking to a life insurance agent who is selling you on the idea of buying one of the many types of permanent life insurance policies on the market, so you can take advantage of its cash value component and use it as an investment vehicle.
Is that the best life insurance policy for you? Sure, it could be, but I don’t know right now. As a Certified Financial Planner, I suggest that before anyone buys a universal life policy or whole life insurance, they understand the impact of higher monthly premiums on their long-term financial outlook, and they should also be sure they can pay these premiums for the rest of their lives. To know for sure, I recommend they go through a planning process to ensure that having one helps them achieve their goals more efficiently than alternatives.
If, after going through a financial plan, this type of insurance is in your best interest, then a 10-year term policy can be fully or partially converted into one of these life insurance options without having to undergo another medical exam. While going through the process, the 10-year term gives you the coverage you need to meet your beneficiary’s financial obligations if you pass away.
8) Some 10-Year Term Policies Offer Additional Coverages
If you play around with our tool that provides life insurance quotes, you will see that term life insurance rates vary widely between the insurance companies.
One reason is that some of these plans have life insurance riders that provide living benefits in addition to the death benefit.
These riders can provide lump sums of money if the insured has a heart attack, stroke, or cancer. Some provide an accelerated death benefit ride,r providing money before a person dies if they are terminally ill. These monies could be used for experimental medical treatments or to do some items on a bucket list. They can be used for whatever the policy owner wants.
The life insurance solution I used for my wife to provide these riders was TransAmerica’s LB Term product. You can use our quote tool to check how much the premium payments would be for you.
As a side note, when you add these living benefits to a policy, you may consider increasing how much coverage you own in case you have a claim on the riders while you are alive. It will reduce the amount of money available to beneficiaries if the insured passes away. The big thing, though, is that if you are on the fence about buying coverage, something is better than nothing.
9) The 10-Year Term Policy Pays the Lowest Commission To Agents
In reality, it isn’t important how much an agent makes. What is important is that you receive the most value for your money. However, know that 10-year term life insurance policies have lower commissions not only because the premiums are lower, but because the cheapest life insurance companies just pay a lower percentage, meaning your premiums are leveraging a benefit to you.
10) The Time and Money Savings of 10-Year Term Allows You To Take Care Of Your Estate Planning
Lastly on this list, the money you save buying 10-year term can be used to take care of some of your estate planning.
For example, you could create a trust and put the death benefit of your life insurance policy into it. The trustee of the trust will manage the proceeds of the policy, and this setup allows the money to be accessed by creditors or in lawsuits, so it is always available for the beneficiary.
If you own a business, you can also use this money to set up a buy-sell agreement. This is a legal document prepared by an attorney that explains exactly how the estate of a deceased partner will sell its share of the business to the remaining owners.
So those are my 10 reasons why I believe 10-year term life insurance is the best option for people under 40. Of all the life insurance products on the market, it offers a guaranteed death benefit at the lowest premium, providing both coverage and flexibility.
