Are you interested in purchasing term life insurance? It could be one of the most important decisions you make, but which term length is right for your needs? Twenty years is one popular term option, as it overlaps with several key financial life events. When you buy a 20-year term life insurance policy, your coverage is guaranteed for the next 20 years. As long as you continue paying your premiums, your coverage will stay in force. Your policy will expire after 20 years, however, and you'll need to buy another policy if you want to stay insured.
Your premium also stays the same for the entire 20 years. The cost of term insurance depends on how long it lasts, with longer-coverage policies costing more. A 20-year term policy is in the middle, as it generally costs more than 10- and 15-year term policies, but less than a 30-year term policy.
When Could It Be Suitable?
Where are you now — and where do you want to be? A 20-year term policy could be a good fit for a number of life stages, and examining your needs and goals could help you decide if this policy type is right for you. Are you a new parent? Congratulations! A 20-year term life insurance policy could be a good option. This policy length would overlap with the time remaining until your new baby becomes an adult.
Stan and Emily, for example, have just had their first child — a baby girl. They both consider 20-year term policies because they believe their daughter will be able to support herself financially once she turns 20.
A 20-year term could also be a good choice if you're in your 40s or 50s and are looking for coverage that will last until you retire. This policy length could cover you until you are ready to leave the working world and live off of your carefully planned retirement savings.
It could also be a good alternative for anyone who would like long-term coverage but hasn't budgeted for the rates on a 30-year policy. A 20-year term policy gives long-term coverage for a couple of decades, and it's generally more affordable.
When Could It Be Less Suitable?
Remember, when choosing a term life policy, consider your long-term goals to find the option that best suits your needs. If you haven't had children yet — but are planning to in the future — a 20-year term policy might not be the most suitable choice. If you choose this policy now and have a child in a few years, the policy might expire before your children are fully grown.
Andrea just got married and would like to have a child in a few years. If she purchases a 20-year term now, her child might only be in middle or high school by the time her policy expires. In this situation, a 30-year term might be a more suitable choice for her needs.
A 20-year term life policy could also be less advisable if your spouse depends on your income, and you have more than 20 years left in your career. To fully protect your spouse, you might need coverage that will last for at least the rest of your career.
Any Other Considerations?
Twenty-year term life insurance could be a good starter policy. You could use this policy as the base of your coverage and then buy additional shorter-term policies to complement your other insurance needs as your financial plan becomes clearer. Remember, you can have more than one life insurance policy.
Above all, it might be helpful to review your options with a trained insurance professional to make sure the term you pick is appropriate for your insurance and financial goals. With some self-reflection, research and a discussion with a financial representative, you could determine whether 20-year term life insurance is right for you.