What’s the Difference between 10, 20, and 30 Year Term?
The different term durations refer to how long your premium is fixed for. So if you purchase 10 year term, your premium is guaranteed to stay level for a 10 year period. After the 10 year period, however, the premiums may go up on an annual basis, known as one year annual renewable term (ART). There are various lengths of term available, such as 10 year, 15, 20, 25, and 30 year. American General even has term policies available for, say, 17 years, or 22 years, where you select the exact term length you need.
How Term Life Insurance Prices are Set
As you might expect, the longer the term, the higher the premium. This is because if your policy allows you to pay a low, fixed premium for a longer period of time such as 20 or 30 years, the insurance company assumes greater risk that they will have to pay out a death claim on you, since clearly your odds of death increase over a 20 year period rather than just 10.
Having said that, 10 year term life insurance is the most affordable type of term life insurance, while 30 year term is the most expensive, whereas 20 year premiums are… you guessed it… somewhere in the middle between the two.
Common uses for 20 year term life insurance are for mortgage protection and income protection. Say you have 18 years left on your mortgage, and the balance is $250,000. If something happens to you, you want your wife to be able to pay off the mortgage. You’re a candidate for a 20 year term life insurance policy. Or say you make $100,000 per year, and your wife and children depend on your income. If you plan to work another 20 years or so, you’d also be a candidate for a 20 year term plan.
Do I Need to Take a Medical Exam to Purchase Term Life Insurance?
We have term policies available with no exam necessary, but we highly recommend that if you are healthy, to apply for a policy which includes a medical exam. The typical exam is a very abbreviated one (blood, urine, blood pressure, weight), and a health questionnaire. If you’re older or are asking for a large face value, more tests may be included.
I’ve had 3 done myself, and each one only took about 15 to 20 minutes. Additionally, it costs about double or more not to have the exam done in most cases.
Think of it from the insurance company’s perspective. If they don’t know much about your health, they’re in a riskier position, and must charge more. So if you’re in good health, why not submit to the medical exam and prove to the insurance company that you are a good risk?
What Happens when My 20 Year Policy Expires?
Once your initial level term has passed, most policies will allow you the option to pay on an annual renewable basis, which typically comes with a hefty premium hike, and increases annually. You can continue paying one year annual renewable rates with most company’s policies up to age 95 or 100. The beauty of this option is that no proof of good health is required.
Since there’s no cash value in term polcies, you might add a return of premium rider to your policy, which is commonly offered with 20 year term policies, so you have something to show for all your years of premium payments if there’s no death.
Many policies will also allow you to convert your term policy to a whole life or universal life policy, also with no proof of good health. These options above are generally only chosen by people who are no longer healthy, since anyone whose term expires and still needs coverage will probably pay far less to purchase a new term policy, but he must be able to qualify medically.
How to Apply for Term Life Insurance
Simply complete the quote form on the right, and you will gain access to policies from various life insurance carriers. Of course, if you have any questions, feel free to call us at 877-996-9383.