A 10-year term life insurance policy provides short-term protection for the insured’s beneficiaries and most are quite affordable. But it’s not the right choice for everyone. Read on to learn more about how these policies work and who they are suitable for.
What is a 10 year term life insurance policy?
A 10-year term life insurance policy is a life insurance policy that only covers the insured for 10 years from the date of purchase. This is just one of many life insurance terms available from top life insurance companies.
How does 10-year term life insurance work?
The policyholder pays the insurance company a monthly premium to keep the policy in force. If the policyholder dies at any time during the term of the contract, the insurance company will pay the agreed death benefit to the beneficiaries of the policyholder.
What happens at the end of a 10-year term life insurance policy?
Once a 10-year term life insurance policy is in effect, the policyholder can choose to end the coverage, renew it for an additional term, or convert it to an insurance policy. -permanent life. The right decision depends on the person’s health and financial situation at the time.
What are the benefits of 10 year term life insurance?
Here are some of the top reasons to get a 10-year term life insurance policy.
Advantage: lower premiums
Term policies are less expensive than permanent life insurance. This is one of the reasons why Dave Ramsey recommends term life insurance. However, the actual costs vary depending on the age and health of the insured as well as the death benefit they want.
Pros: simpler policies
Buying life insurance without understanding it is one of the biggest mistakes in life insurance. But fortunately, 10-year term life insurance policies aren’t as complex as some permanent life insurance policies.
For: Guaranteed Death Benefit
If the insured dies during the 10-year term of the policy, the insurance company will pay a predetermined amount to the beneficiaries of the insured as long as the policy was in good standing. This can provide a welcome sense of security to family members left behind.
Advantage: Good for short-term insurance needs
A 10-year term life insurance policy is not as much of a long-term commitment as permanent life insurance. It can give policyholders peace of mind while they need it. Then, when they don’t need it, they can drop coverage and keep that premium each month.
Advantage: Flexibility to terminate, renew or convert the policy after term
When a 10-year term life insurance policy is in effect, most insurers offer several options to the policyholder. This is less restrictive than permanent life insurance policies.
What are the disadvantages of 10-year term life insurance?
Here are some disadvantages of buying a 10-year term life insurance policy:
Con: Rates vary by age and health
Term life insurance rates are generally affordable, but the exact costs depend on the person’s age and health. Those who smoke or have other health conditions generally pay more than older adults. That’s why most people shouldn’t wait to buy life insurance.
Cons: No cash value
Permanent life insurance gives policyholders a cash value that they can borrow against in the future, but 10-year term life insurance does not have this option. Beneficiaries only receive money from the policy if the insured dies during the term.
Disadvantage: No savings component
Term life insurance does not allow policyholders to put a portion of their premiums into a savings or investment account where it could grow in value over time. All premiums paid are used to keep the policy in force.
Disadvantage: renewing and converting policies can be expensive
Although it is possible to renew a term life insurance policy and convert it to a permanent life insurance policy, it can be expensive. Policyholders with little cash may not be able to afford it.
When is 10-year term life insurance worth it?
Those who meet one or more of the following criteria may want to invest in a 10-year term life insurance policy:
If your age makes it impossible to qualify for other policies
Seniors may struggle to find an affordable permanent life insurance policy or a longer-term policy. In this case, a 10-year policy may provide the coverage they need for a short time. Then, when the term is up, they can reassess and see where they stand.
If other life insurance policies have expired
Those who have had an old term life insurance policy may decide they need a little extra coverage. A 10-year policy is a good choice for this because it provides short-term protection at an affordable rate.
If you only need coverage for your short-term financial obligations
Those with outstanding mortgages or loans that they expect to pay off in a decade may prefer a short-term life insurance policy instead of a longer-term or permanent life insurance policy. .
If you are retiring soon
Workers planning to retire soon may only want life insurance coverage for a short time, until they are ready to dip into their retirement savings. After that, they can choose to live off their nest egg instead of paying insurance.
If you have soon-to-be-independent children
Term life insurance is common among parents of minor children, but policyholders with teenage children might prefer a 10-year policy instead of a longer-term policy. Once their children are independent, they may no longer need the insurance coverage.
If you want to save money while you prepare for more permanent coverage
Term life insurance is a more affordable option than permanent life insurance. So it might suit those looking to save money in the short term. Once the 10-year term policy expires, the policyholder can then consider switching to a permanent policy if that makes more sense to them.
10-year term life insurance rates
Here’s a closer look at the costs of 10-year term life insurance and the factors that affect rates:
How much does 10-year term life insurance cost?
A 10-year term life insurance policy can cost as little as $10 per month or up to $75 per month. It all depends on the desired level of coverage as well as the applicant’s age and health.
Most people under 50 can expect to spend less than $20 per month for $250,000 coverage. But the only way to know for sure what a specific person will pay is to get quotes. Here is an overview of how to buy life insurance.
What factors affect 10-year term life insurance rates?
The following factors have a significant effect on 10-year term life insurance rates:
Seniors generally pay more for term life insurance than younger adults.
People with chronic conditions are more likely to die during the term of their policy, so these people generally pay higher premiums.
A poor health history is also a red flag for insurers, so they charge these people more for 10-year term life insurance.
A high body mass index (BMI) can increase a person’s risk for various serious health conditions. This is why insurers often charge people with a high BMI more than those with a lower BMI.
Smoking increases the risk of lung cancer and other diseases, so insurers charge smokers more than non-smokers.