I get it! There are a lot more pleasant things to be doing than shopping for life insurance policies. However, here you are, going through the process and doing your due diligence because you understand the importance of having the death benefit protection life insurance provides, and you want to protect your family or your business. Of course, you want to do it in the most cost-effective way possible. In this article, I will help put this process of buying life insurance behind you by explaining 10 Reasons I have a majority of my healthy insurance customers, who are under 40-years old, purchase simple 10-year term life insurance to take care of their life insurance needs.
Fast and Free 10-Year Term Life Insurance Quotes
1) 10 Year Term Life insurance provides the most death benefit protection per dollar of premium spent.
Let me just lay it out for you. A $1,000,000 10 year term-life insurance policy on the life of a healthy 35-year-old male non-smoker with an impeccable medical history costs as little as $19.55 per month! You read that right – a life insurance premium of ONLY $19.55 month! How do I know? This is the quote I get from Transamerica in our life insurance quote tool that you can check out after you read this article. $19.55 per month is an incredibly low amount to pay for the peace of mind that comes with knowing your family will financial support if something happens to the breadwinner in the family.
And, if you are looking for an even higher amount of protection, the same 35-year old guy could purchase a $2,000,000 policy for just $36.55 per month! This may sound like a lot of insurance, but O can tell you as a financial advisor, people under 40 require millions of dollars of coverage to replace their income if they should die. This is what life insurance is designed for – to make sure if something happens, a family or a business can continue living without money being a worry.
One of my tenants to making financial decisions is “leverage,” and 10-year term life insurance allows you to leverage its smaller life insurance premiums to receive the most term-life coverage.
2) A 10-Year Term Life Insurance Can Often Continue Until Age 95
At the time of this writing, I am 50 years old and feel in terrific health. But I had some health issues back in 2016, and they have made me 100% uninsurable for the rest of my life. Therefore, the life insurance I had in place before I had my health problems will be all I will ever get as an individual (Note: If I ever join a “group” – “get a job” I can likely get some through my employer if it is an offered benefit. Know though group rates typically have higher premiums for healthy individuals than buying a policy outright.)
What kind of life insurance coverage did I buy? You got it – mostly 10-year term. Why? Because it was the cheapest life insurance option and I know I can continue my coverage once the term ends until I am 95 years old (or “convert it” which I will discuss later.)
For a policy, “the term” is when the premium remains level for the consumer. For the life insurance company, they look at the cost of insuring the person every year. Once the term is over, the insurance premium you will pay on the policy is the cost required to insure you AT YOUR CURRENT ATTAINED AGE. This means the premium will go up every year you keep the policy. If it is your only option and you need insurance, that may be ok in the big scheme of things.
The other option (if you still need insurance) and are healthy enough is to take out a new 10-year policy if you are still insurable.
I have heard too many life agents tell prospective customers they NEED to buy 20-year term to lock in the rate and make sure they can have a policy in the future. This is only partially true. The “term” locks in the rate for a specific period but the policy can last and provide lifetime coverage as one year renewable term.
3) Your 10-Year Term Life Insurance Can Be Replaced Using Other Life Insurance Companies
Here is a statistic you will be interested to know…
According to LIMRA , the average life insurance policy only stays in force for less than 4 years! I am not saying you are going only to keep your policy for just a couple of years, but if you do, then buying a 20 or 30-year term policy and paying more premium today so you can “lock in the rate” for that long would be a complete waste of money.
It isn’t surprising that term life policies don’t stay in force that long. The noble reasons you may hear about is that people’s lives and needs change over time. You know, the idea that they purchased a life insurance policy when their kids were young with the intention of having it until they graduated college but then didn’t need it as much.
Well, I am going to share with your from experience that a lot of policies lapse because “people don’t think they will use it, so paying the premium seems like a waste of money.” The Old “I haven’t died yet and don’t plan on dying” excuse.
Listen, you are looking at buying life insurance right now because of something in your life that has you realizing the importance of having coverage for your family or business and you are willing to spend money to have that peace of mind. This need isn’t likely going away though your desire for that peace of mind might. If someone dies and the support they provide vanishes, the people left behind to struggle. Life insurance death benefits prevent that.
Therefore, I believe that having the lower premium requirements of a 10-year term will prevent these lapses. $20 a month coming is much different than $50 a month today for the same coverage.
Once you have the life insurance coverage in place, you can replace it with a policy from another company in the future and have those rates locked in for another 10 years if you want. Yes, you will be older, but you would have 5-7 years of lower payments with this original policy.
There are many reasons why someone might need to replace their life insurance policy, and there are many different life insurance companies to choose from.
The important thing is to make sure you are getting the coverage you need at a price you can afford.
4) The Lower Premium Leave Money For Other Coverage
Here is the realities of life. If you are in excellent health -even if you have a few medical issues – the odds are you will not die before you are 60 years old! Yes, there is a chance, but the odds say you won’t. This is why the life insurance rates for term insurance are so low. You buy life insurance because the odds are low it will happen, but the consequences to others if it does are astronomical.
When someone dies who is young, it is always a tragedy. It is usually a freak accident or illness that ends up taking away their life. However, many times those freak accidents or illnesses don’t take their life but cause other problems that can cause financial hardship.
Buying cheap life insurance from one of the many highly rated life insurance providers in the market leaves you with more money to address other needs. You can see my “castle” in the picture beside this paragraph. On it, you’ll notice life insurance is just one part of the foundation. There is also health insurance, disability income replacement, long-term care, and home an auto.
A home or business’s protection portfolio is only as strong as its weakest link. Spending less on death benefit protection gives you more money to put a plan in place to address these other areas too.
5) Spending Less on Life Insurance Equals Less Guilt
Insurance is a crazy product in that you buy it in the hopes you never have to use it. Instead, you have insurance in case you need it.
Life insurance is even crazier because when you buy life insurance on your own life, it’s to provide a death benefit for your beneficiaries. You won’t be around to see its impact on those the proceeds takes care of.
I know I hate spending money when I feel I am wasting it. I mentioned earlier that people don’t plan on dying, and I am willing to bet you aren’t either. So doesn’t it make sense to take the cheaper life insurance option for the most death benefit coverage possible? Of course it does.
6) Less Premium Today Equals Faster Decisions
I will say this again if you are healthy, the odds say you aren’t going to die tomorrow. The problem is if you do, and people depend on your income, then not having insurance in place will make a horrible situation a million times worse.
I don’t know about you but when I want something that doesn’t cost much I just get it. As it starts to cost more, I delay longer to make sure I am not wasting my money.
7) 10-Year Term Life Insurance Can Be Converted to Permanent Life Insurance
You may be talking to a life insurance agent who is selling you on the idea of buying one of the many types of permanent life insurance policies on the market so you can take advantage of its cash value component and use it as an investment vehicle.
Is that the best life insurance policy for you? Sure, it could be, but I don’t know right now. As a Certified Financial Planner, I suggest before anyone buys a universal life policy or whole life insurance, they need to understand the impact of those higher monthly premiums on their long-term financial outlook and they also need to be sure they can pay these premiums for the rest of their lifes. To know for sure, I recommend they go through a planning process to make sure having one helps them achieve their goals more efficiently than any alternatives.
If, after going through a financial plan, this type of insurance is in your best interest, then a 10-year term policy can be fully or partially converted into one of these life insurance options without having to have another medical exam. While going through the process, the 10-year term gives you the coverage you need to meet your beneficiary’s financial obligations if you pass away.
8) Some 10-Year Term Policies Offer Additional Coverages
If you play around with our tool that provides life insurance quotes, you will see that term life insurance rates vary widely between the insurance companies.
One reason is that some of these plans have life insurance riders that provide living benefits in addition to the death benefit.
These riders can provide lump sums of money if the insured has a heart attack, stroke or cancer. Some provide an accelerated death benefit rider providing money before a person dies if they are terminally ill. These monies could be used for experimental medical treatments or to do some items on a bucket list. They can be used for whatever the policy owner wants.
The life insurance solutions I used for my wife to provide these riders was TransAmerica’s LB Term product which you can check out how much premium payments would be for you on our quote tool.
As a side note, when you add these living benefits to a policy, you may consider increasing how much coverage you own in case you have a claim on the riders while you are alive. It will reduce the money available for beneficiaries if the insured does pass away. The big thing though is, if you are on the fence about buying coverage, something is better than nothing.
9) The 10-Year Term Policy Pays the Lowest Commission To Agents
In reality, it isn’t important how much an agent makes. What is important is that you receive the most value for your money. However, know that 10-year term life insurance policies have lower commissions not only because the premiums are lower, but because the cheapest life insurance companies just pay less percentage meaning your premiums are leveraging benefit to you.
10) The Time and Money Savings of 10-Year Term Allows You To Take Care Of Your Estate Planning
Lastly on this list, the money you save buying 10-year term can be used to take care of some of your estate planning.
For example, you could create a trust and put the death benefit of your life insurance policy into it. The trustee of the trust will manage the proceeds of the policy and this set up can the money from creditors or lawsuits so it is always available for the beneficiary.
If you own a business, you can also use this money to set-up a buy-sell agreement. This is a legal document created by an attorney explaining exactly how the estate of a deceased partner will sell their share of the business to the remaining owners.
So those are my 10 reasons I believe 10-year term life insurance is the best option for people under 40 years old. Of all the life insurance products on the market, it provides a guaranteed death benefit for the lowest premium which provides both coverage and flexibility.
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