In connection with life insurance, time is important. Why? Because term life insurance is based on a period of time. It provides coverage for a certain period of time, which, depending on the term length you choose, can last until your kids go to college or your mortgage is paid off.
When the term expires, so does your coverage, unless you choose to extend the term, usually at a higher premium. That makes it extra important to choose the right time period.
So with a 15-year life insurance policy, you want to provide replacement income to your beneficiaries via a death benefit should something happen to you during the decade and a half that the policy is in effect.
To make the best decision for you, let̵7;s discuss how to choose the right term, the four types of people who may need a 15-year term life insurance policy, and how much such a life insurance policy costs.
4 types of people who may need a 15-year life insurance policy
Everyone’s financial situation is unique, so how do you calculate how long the term should be? Take a look at the following types of people who might be good candidates for 15-year term life insurance.
“I have children”
Raising children is expensive. How expensive? A 2022 study found that raising a child born in 2015 to age 17 will cost a whopping $310,605 … and that doesn’t include college costs.
If you plan to provide financial support for your children until they are legally adults or through their college careers, life insurance can help protect your ability to do so should you pass away prematurely. If your children are in primary school, a 15-year policy can be an excellent choice to get them off to a good start in life.
Buying a 15-year, $750,000 policy as a healthy 40-year-old woman would start at about $26 per month.
“I have less than 15 years left on my loan.”
Losing a partner is devastating to the one left behind. One thing you can do to ease the burden is to provide a financial safety net that can help you pay off your mortgage in the event of your death.
If you have a 15-year mortgage or less, a 15-year term life insurance policy in an amount that covers the outstanding balance may make sense. The proceeds from your policy can be used by your partner to help pay the mortgage and other day-to-day expenses while they adjust to their new situation – a welcome reprieve when it’s needed most.
“I’ll retire in 10 to 15 years.”
For many, the goal of life insurance is to replace the income you contributed to your household if you pass away. As time goes by and your children leave the nest, your mortgage is paid off and you approach retirement, your financial needs may decrease, especially if you’ve put away a large nest egg.
If this sounds like you and retirement are a bright beacon 10-15 years down the road, a 15-year life insurance policy could work well for you and your family. However, remember that for some people, maintaining life insurance until retirement is a good move.
“I plan to be financially independent within 15 years.”
Depending on where you are in life, a 15-year time horizon could end in financial independence for you and your partner. Maybe your plan is to pay off all your debt and withdraw a lot of money during your best earning years, freeing you from financial burdens you can’t cover. In that case, a 15-year term life insurance policy may be a good option to provide a safety net during your build-up period.
The bonus? Shorter terms such as 15 years usually cost less than longer terms such as 20 or 30 years. Be sure to reevaluate periodically if your plans change during that time.
How much does 15-year life insurance cost?
Everyone has a budget and everyone likes to keep costs down where they can so let’s get down to some numbers regarding life insurance premiums. How much can a 15-year term life insurance cost?
Check out these life insurance quotes for monthly premiums that adults of different ages can pay for different coverage amounts:
- 15-year $250,000 policy for a 25-year-old male in excellent health: $9.99 per month
- 15-year $500,000 policy for a 30-year-old woman in excellent health: $13.11 per month
- 15-year, $750,000 policy for a 35-year-old male in excellent health: $20.36 per month
- 15-year, $1,000,000 policy for a 40-year-old woman in excellent health: $32.94 per month
Estimates based on Haven Term applicants issued by CM Life. Price differences will vary depending on age, health status, coverage amount and term length. These rates do not reflect rates for applicants in DE, FL, ND, NY and SD issued by MassMutual.
Speaking of getting down to the numbers, how much coverage should you get? To get a baseline, create a “personal balance sheet” for your family. You’ll want to include categories for all of your expenses (mortgage, credit card debt, student loans, Amazon habit, etc.) and your assets (college funds, retirement accounts, savings, etc.).
Any gaps between the two will be a useful indicator of how much coverage you need. Also consider how many people are dependent on you financially and how long they will be in that situation. If you’re not a numbers guy, use our life insurance calculator, which will give you an estimate based on the numbers you enter.
Is 15-year term life insurance right for you?
Life insurance policies come in all shapes and sizes. With online calculators and the ability to complete a life insurance application online, buying life insurance has never been easier. (And the cost of life insurance has never been lower.)
Still, choices must be made about your policy, including how long the term should be. It’s a big decision because you’re buying something that’s supposed to protect your family financially.
Take a financial inventory of where you are in life … and where you want to be, then take advantage of online resources to determine if 15-year term life insurance is a good idea for you. No matter which term you choose, you are doing something important for your family.
About Tom Anderson
Tom Anderson is an award-winning financial journalist whose work has appeared in CNBC.com, Kiplinger’s Personal Finance, Money, Eyeglass and Wire bound. He was a 2008-09 Knight-Bagehot Fellow in Economics and Business Journalism at Columbia University.
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