Knowing how long you'll need term life insurance can be tricky, but with a little guidance, an answer may be closer than you think.
There are a lot questions that you have to answer for yourself before you buy life insurance. The answers to any one of these questions can change the size and shape of your potential life insurance policy. The world of life insurance is incredibly dynamic, but with so many options and decisions, the silver lining is that you can find a policy that fits your present and future needs.
The first step that you'll face is deciding which type of life insurance will be most beneficial to you, and, for many people, the answer to that question is term life insurance. With term life insurance, your policy lasts a distinct period of time of which you choose, and you pay a fixed premium throughout that period. The payout that your beneficiaries receive on a term life insurance policy is guaranteed and currently income tax free*.
So the question that remains once you've gotten this far is how many years of term life insurance do I need? As you might have guessed, the answer isn't immediately obvious, but by taking a look at a few different aspects of your life, you should be able to find the right answer.
Do you have a mortgage or other debt?
A term life insurance policy can help protect your family against the woes of debt if you were to pass away. If your debts are short term and you don't own a home, then you may want to choose a shorter term length. However, if you have a new home or other significant debts (e.g. student or business loans), consider a longer term policy - especially if you want to ensure that your policy will endure for the length of time it will take to pay off these debts.
Who depends on you?
The number of people who depend on you and the length of time they'll need your financial support is a substantial factor in deciding how many years of life insurance you'll need. If you want to support your children through college or into adulthood, choose a term length that will reflect the number of years until they reach full financial independence. It's also important to consider those who may depend on you outside of your spouse and kids. Do you have parents who might rely on you financially after retirement or a relative with special needs? The idea here is to choose a term length that will help protect all of those who count on you until the time that they no longer need your care.
What can you afford?
The amount of coverage you need may also affect your term length. With any given amount of coverage, you will pay a higher premium as the term length increases. Unfortunately, if you need a significant amount of coverage, a shorter term life insurance policy may be what you can afford. It's important to note that you can likely review or renew your policy down the line when what you can afford will have hopefully increased.
Now that you've collected all this information, how exactly does it help you figure out how long you need term life insurance?
Once you've calculated your debts, dependents and current budget, you'll have a better idea of what term life insurance policy best fits your needs. Our term life insurance calculator can help you too - give it a try. If you're ready to take the plunge now, request a free quote online today.
*Death Benefits are generally excludable from the beneficiary’s federal taxable income under most circumstances and under current federal income tax law. You should consult your tax advisors for your specific factual situation.
