Term Life Insurance - How Long Should the Term Be?

I recently renewed my term life policy and chose a 20 year term. A 10 year term would only have taken my youngest child until she was 19, which I decided wasn't enough, so I went with the 20 year term.

If the premium difference between 25 and 30 is substantial (or your mortgage will be paid off in less than 30 years) then go for 25. If it doesn't make that big of a difference, or your mortgage won't be paid off, consider the 30.

Please ignore the advice for whole life. Term is not a waste of money, it's exactly what insurance should be - play a small amount and hope you never need it. I used to sell insurance and whole life, except for a very, very, very small segment of the population (those who have substantial estates), is a waste. As you probably already know, you are much better off paying a small premium for term (and hope you never need it) while you invest in other vehicles for long-term goals such as college, retirement, or your own funeral expenses. Whole life is a really, really crappy investment vehicle.

Get the 30 year term. I agree with JB. I used to work for an insurance company and they would do their best to hook you into the whole life policy (agent go bigger commission). Yes taking out a loan against the policy is great if you really need it but it will reduce the amount you get at the end if you don't pay it back or the dividends don't cover the amount.

The other reason to get as much as you can when you are younger is you don't know what your health will be later on and how much you might not be able to get because of the cost of the premiums. There used to be level term, decreasing term and regular term which stayed the same throughout the life of the policy. We refinanced our home and had to get physicals for term. But hubby found out a week before at a physical that he had a medical problem and could not get any insurance. So I have the bulk of the coverage on me and a small amount on him.

You purchase care insurance hoping that you won't need it but it is nice to have. You purchase travel insurance when you travel hoping you won't need it. Unless you are in the .001% you won't need insurance.

Check with several agents and an independent agent for rates.

the other S.

If you are going with term, I'd lock in the longest term you can afford. The premium difference between 25 and 30 years is not that much. 30 years will generally cover the length of a mortgage and would cover another kid in case you have one after this one. If it turns out you really don't need it for as long as the term, you can stop paying and let it lapse.

I would also look into getting some whole life on yourself and your children. Unless you prepay a funeral, you will still have burial expenses after the term is over and once the term resets, premiums will go through the roof. Whole life will lock the premium in. Whole life on children is extremely cheap and my son's policy will be paid off after 15 years and continue to build cash value. When he is older, I'll sign the policy over to him and he will have it in place for his family.

The term of tour policy should match the period of time that you need to be insured. You should look at more than just how long your child (children) are in your care. If you are making significant savings during the same period, then that period of time may be shorter (i.e. your saving cover the expenses the insurance was meant to) so that the few extra years of one child in college wouldn't be a big deal.
On the other hand, there are more expenses than just child rearing to think about. How stable is your life style? How much longer is your mortgage? Do you have any other significant debt? Do you or any member of your family have health concern that would pose long term costs that would be unmanageable without income? Are you sure this is the last child? Etc.
There is also the expense of the insurance to think about. The way term life insurance makes money is that very few people actually pay for the insurance for the entire term. If the expense is prohibitive or if you are likely not to continue with the insurance for the entire term (such as switching to an insurance through your job or shopping for cheaper insurance every couple of years), you are better off with a shorter term.
All in all, your best bet is to discuss it with a financial planner (not insurance salesman) about what fits you best.

Hi C.S.

I am a financial advisor. There are many options and things to consider. Do you have a mortgage? If so, when would that be paid off? Your other children, how old are they? Do both you and your husband work? Are your wages equal if so?

I will often suggest laddering life insurance policies for your situation. For example, you might consider a $150K level term policy for 20 years and a $150K level term policy for 30 years. This is often a cheaper premium than a 30 year term $300K policy but at 20 years you've gotten one or two children through school and paid off your mortgage....For people with a huge gap between children (such as in second families), we will often front load. In other words if you have 3 teenagers and two in preschool, you might do a 15 year $300K and a 25 year $200K.

Also, are you and your husband the same age? Same health situation, etc? Hard to answer a lot more with out having details but you are welcome to message me directly with any questions! C.

I did 30 because if you need to get an additional few years at the end, what is relatively inexpensive now will be very expensive later if you need to get another term policy for some reason.

ETA: The best way to get this kind of advice is to talk to a financial advisor. You do NOT have to have a lot of money in order to get this kind of advice. Companies like Hefron Tillotson, Merril Lynch, etc, will go over all financial stuff (insurance, bank accounts, retirement accounts, as well as your debts and bills mortgage, car payment, etc). They will recommend to you how much term insurance you need (they don't sell it, so they won't have a horse in the game). And then they will advise you on your savings strategy - which they then hope you will choose them to oversee. But you don't have to choose them, and you shouldn't overlook the free advice that a financial planner can give you in terms of insurance and similar planning. (No, I don't work for any company like this. But I started talking to a financial planner when I was just starting out in my career, and that advice has helped me so much over the years.)

Dave Ramsey says it should last until the kids aren't dependent on you anymore. I guess that's till they're about 22 and out of college? If it were me, I'd get the longest term I could afford. Ours were 30 years. I don't think there is much difference in the price.

I think term life insurance is a waste of money. You pay for premiums for the term of the policy, once the term has ended you have NO return on your money. You would be better off putting the money in a savings account and collecting interest over the years.
Term life insurance has no cash values, whole life has cash value after a few years, if needed you can take a loan against your insurance. If you decide to renew the policy in 20 years you are now paying premiums on the rate of a person 20 years older than when you took out the original policy. In other word a life insurance policy for a 25 year old has a lower premium than a policy for a 45 year old. You will have end of life expenses, my mom's funeral cost $13,000 + the cost to dig the grave + cost to carve her name into the headstone + the newspaper obituary + luncheon + cost of deacon to conduct ceremony. There will be bills to pay utilities, property tax, cost of probate attorney, medical bills, etc. Will your family have the money to cover these bills?
A whole life policy of $100,000 will help your family cover the bills and hopefully leave a little extra for them to invest or take a vacation. Before you decide look into whole life insurance.

I am 30, and mine is 30 years. I just had our second son (although we might have more kids later).

Not sure if your insurance is flexible or not, but ours wouldn't allow me a policy until after the birth of our baby. Just to make sure everything went smoothly, I suppose. I applied while pregnant and did all of the preliminary paperwork early on and they postponed the rest until afterward.

I have a small whole life but my husband has a much larger term. I am a SAHM so it works for us. I would go for a longer term as it shouldn't cost much more. We also went for a higher premium for his - we can always reduce it but it's harder to increase.

I wanted to add that my policy is one that my parents took out when I was a minor. I agree that it's not a bad idea to get one for your baby.

We just got me a new policy. Old one was for 20 years. New one is for 20 years too. My youngest will be 22 when the policy ends. I doubled my policy. For me, leaving a larger sum earlier was more important than having a longer term and a smaller amount. If something happens NOW, with little ones, there will be greater need. At 22, I hope she has the skills to make it on whatever assets we would leave behind. Right now our assets are near what my old policy was, so do keep your assets in mind here.

For a very long time I had both whole life and term life insurances. I recently cashed out the whole life policy which made it possible for me to do some things I needed to take care of and I still have my term policy which I believe is for 30 years and for a substantial amount of coverage since I live in the expensive north east. LOL.

Do what you feel is best for you and your family. I hope my answer is helpful to you.