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When you’re buying, you have two main decisions to make: and how long the coverage should last. You want the policy to continue until your last major obligation is taken care of. So, the duration of your financial commitments will generally determine how long your term life insurance policy should last.
Term life policies are generally sold in lengths of five, 10, 15, 20, 25 or 30 years. In some cases, you can find 40-year term life insurance. The longer the policy, the higher your are likely to be. That’s because you’re locking in your rate for a longer time, and as you age, health problems tend to crop up and your likelihood of dying increases.
Another option is , which guarantees your ability to renew coverage annually for a set period of time without reapplying. But when you renew coverage, the premiums typically increase. As such, you’ll generally pay less over time for a standard policy.
Here are the most common term lengths and who they might be a good fit for.
Annual renewable term life is a good choice for people who have short-term financial obligations, or who want to cover a gap in employment until they get a new policy through their next job.
5-year term life insurance may also be a good fit for someone with short-term financial obligations, such as a small loan or college fees.
10-year term life insurance may benefit parents or guardians with older children who still rely on their income, or someone approaching retirement who needs to cover the last leg of their employment.
20-year term life insurance is the most popular term length and can help cover the income of new parents or newlyweds as their family grows.
30-year term life insurance can help cover large, long-term financial obligations, such as a mortgage or college debt. This term length may also be a good fit for young applicants who want to cover the majority of their earning years.
If your longest-lasting financial obligation falls in between available term periods, round up. For example, if your mortgage will be paid off in 17 years, round up your term choice to 20 years.
If you're wondering how long your term length should be, think about the following three factors.