Picking a Term Length That Matches Your Debts

Once you decide term life insurance is right for you, the next question is how long the term should be. A good rule: the policy should last as long as the people who depend on you would struggle without your income.

Match the term to your biggest obligations

List the financial commitments your family would still face if you were gone, and how many years each one has left:

• Your mortgage — how many years until it is paid off?
• Your children — how many years until the youngest is financially independent, including college if you plan to help?
• Your income — how many working years until you expect to retire?

The longest of these is usually a good starting point for your term length.

Common term lengths

• 10 years — short-term needs, such as a loan or the last years before retirement.
• 20 years — popular with parents of young children or people with a newer mortgage.
• 30 years — covers a new 30-year mortgage or a newborn all the way to adulthood.

Longer terms cost more each year, because the insurer is covering you into older ages. But your rate is locked in based on your age and health when you buy, so buying a longer term while you are younger can cost less overall than buying a short term now and another policy later.

Laddering: more than one policy

Your coverage needs usually shrink over time — the mortgage gets smaller and the children grow up. Some people buy two or three policies with different lengths instead of one large policy. For example, a large 20-year policy plus a smaller 30-year policy. As the shorter policy ends, coverage steps down along with your needs, and the total cost is often lower.

What happens when the term ends

When the term ends, coverage stops. Many policies let you renew year by year, but at a much higher price based on your age then. Many term policies also let you convert to permanent coverage before a set age or date without a new medical exam — worth checking if your health could change.

Compare quotes for the length you choose

Once you know the term length and amount, compare quotes from several carriers for exactly that. Prices for the same policy can vary a lot from one company to the next.

This guide is general information, not financial advice.