Ten years ago, no one had ever heard of covid. Tesla stock was $10 per share. New Yorkers were obsessed with something called the Cronut. (Mmm… Cronut…)
What life will look like in ten years, who knows? But we assume this article will be written with the help of AI and holograms.
And not to get morbid on you, but there’s also a non-zero chance that the worst could happen to you in the next decade. And if it does, what would your loved ones do and how would they pay for necessities like housing and groceries? Given that possibility, it’s worth considering whether a 10-year term life insurance policy is right for you.
To help you out, here’s a look at exactly what 10-year term life insurance is and what it can cost.
What is a 10-year term life insurance policy?
Life insurance has been around for a long, long time. (In ancient times, it was used to support war widows.) And in a way, it hasn’t really changed since then.
Here’s how it works: A group of people pay premiums to a life insurer, and that insurer pays out a death benefit when the insured person dies. This payment is usually a lump sum, is tax-free, and is intended to provide financial protection for the insured’s family, especially if that person dies during the years when other people depend on them to pay for things like food, housing, or education.
Life insurance is a specific type of life insurance that provides coverage for a specific period of time, often 10, 15, 20, 25 or 30 years. If you die during the term – a decade in the case of a ten-year policy – a death benefit is paid to your loved ones, those you have named as beneficiaries.
Who needs 10-year life insurance?
A 10-year term life insurance policy may be best suited for you if…:
If you have short-term financial commitments
Maybe you are 20 years into a 30-year mortgage. Or you have a few years before your student loan debt or credit card debt is paid off.
If something were to happen to you in the next 10 years, these commitments could go unfulfilled, or fall to a spouse or relative to care for when they are already grieving your loss. Ten-year life insurance is a way to provide financial protection for your loved ones in case you are not around to pay for the important things in the years to come.
If your children are in middle school or high school
Maybe your house is paid off, but you expect your kids to go to college in the next ten years or so. Who would pay for their tuition? Not to mention books, housing and so on.
Even if you’ve saved with a 529, or expect your children to pay their own tuition, or know your child may pursue a path beyond college, you never know what the future may hold, and a 10-year life insurance policy helps to make sure you are covered. After all, a life insurance payout can be used for anything—even everyday basics like groceries and bills.
Note that for those with younger children (or more time left on the mortgage), 20-year term life insurance or even a 30-year term may make sense.
If you retire in 10 years
One of the benefits of life insurance is that it’s there when you need it and disappears when you don’t. Case in point? Your pension. If you think that in a decade or so your children will be financially independent of you and your spouse will be taken care of by retirement savings and Social Security, then you don’t really need the protection that life insurance offers after ten years.
Between now and then? Absolutely. But when the term expires, you avoid the hassle and cost of monthly premiums.
How much does 10-year life insurance cost?
Because it usually covers the years when you’re younger and healthier (read: less likely to die), term life insurance is often the most affordable type of life insurance, and it makes a lot of sense for people who only need coverage during the years when they’re drawing a paycheck.
In other words, it’s life insurance coverage for the years when you’re responsible for paying for other people’s necessities and niceties, and/or paying for something big like a mortgage.
This is different from whole life insurance, also called permanent life insurance, which provides coverage for your entire life, but also tends to cost more because it covers the years when you are older and less healthy. Chances are, you’ll no longer be paying off a mortgage or covering a child’s tuition in your later years, and you may not even be drawing a paycheck due to retirement. In other words, no one would suffer financially if something were to happen to you. (Emotionally, of course, is another matter.)
A life insurance policy for ten years is therefore a life insurance policy that lasts for ten years. (Of course.) It’s often the shortest term an insurer offers, and will cost less than a longer term for the same person. That said, since a ten-year term tends to make sense for someone in their mid-40s to mid-50s, the cost of life insurance can be more than a comparable amount of coverage would for someone younger.
Here are some examples of life insurance premiums for a 10-year Haven Term policy, issued by MassMutual or its subsidiary, CM Life, for an adult in excellent health:
|Source: Haven Life
Keep in mind that these are tiered life insurance premiums – meaning you’ll pay the same monthly premium throughout your policy term. That’s another reason to get life insurance sooner rather than later: you’ll never be younger than you are today, and you’re likely to be as healthy as you’ll ever be, too.
When it comes to how much coverage you need, the general rule of thumb is to get 5 to 10 times your annual salary. In other words, enough coverage for the years when you can no longer pay for things. At Haven Life, you can purchase insurance for anywhere from $250,000 to $3 million, and the average life insurance payout is $618,000.
How to get a 10 year life insurance policy
Another thing that’s changed in the last ten years: You apply for affordable life insurance online in about the time it takes to eat lunch. For some people, you may even get a coverage decision during that time.
Start your journey by getting a free life insurance quote online. Peace of mind awaits.