How long do I need life insurance?

Life insurance is a commitment to your family’s financial future, but how long do you need it? This question doesn’t have a one-size-fits-all answer because every family’s needs are different. For some, a decade of coverage may be enough to get through critical financial milestones, while others might need decades-long protection.

Understanding how long you need life insurance requires considering your unique circumstances, such as your age, financial obligations, and dependents. The right term length ensures you’re covered when your loved ones need it most, without paying for unnecessary coverage.

If you’ve been wondering, “How long should I have life insurance for?” We’re here to help. SBLI dives into the options and factors to help you decide on the best duration for your policy.

Understanding life insurance term lengths

At what age does life insurance expire? The answer largely depends on the type of insurance you have. Insurance options with an end date are called term life insurance. This option offers flexible coverage periods to suit various life stages and financial goals. Unlike permanent life insurance, which lasts for your entire life, term life insurance provides coverage for a set number of years, making it more affordable and easier to tailor to specific needs.

The most common life insurance term lengths are 10, 15, 20, 25, and 30 years, each designed to align with different financial responsibilities. For example, someone in their 20s with a new mortgage and small children might choose a 30-year term to ensure their family is protected until the mortgage is paid off and the kids are financially independent. Meanwhile, a retiree in their late 50s might only need a 10-year term to cover any remaining debts.

Annual renewable term life insurance

While it may be tempting to save initial costs with a shorter term, consider the long-term implications. Applying for a new policy later in life can be costly, as premiums increase with age and health changes. Opting for a longer term from the start locks in your rate, ensuring cost savings over time.

Who benefits from annual renewable term life insurance?

• Those working on improving their health: If you’re quitting smoking, losing weight, or addressing other health concerns, you might temporarily use this policy while working toward qualifying for a longer, more affordable term.
• People in transition: If you’re switching jobs, waiting for employer-provided coverage to kick in, or facing temporary financial uncertainty, this policy offers flexibility without locking you into a long-term commitment.

While it’s helpful in the short run, annual renewable term insurance becomes increasingly expensive over time. If you anticipate needing coverage for more than a few years, you’re likely better off choosing a longer-term policy from the start.

10-Year term life insurance

A 10-year term is one of the shortest options available and is often chosen by individuals with limited financial responsibilities or specific short-term needs. These policies are a cost-effective solution for those who want affordable coverage for a defined period.

When is a 10-year term ideal?

• Older adults nearing retirement: If you’re approaching retirement age and only need coverage until your pension or Social Security benefits take effect, this term length can bridge the gap.
• Paying off small debts: If you have a car loan or other minor financial obligations that will be paid off within a decade, this term ensures your loved ones aren’t left with those burdens.
• Limited family needs: For those without young children or dependents, a 10-year policy provides a safety net without overcommitting financially.

This term length is straightforward and cost-effective, making it a practical choice for targeted financial protection.

20-Year term life insurance

The 20-year term is by far the most popular choice among policyholders, offering a balance between affordability and long-term coverage. This term length is particularly appealing to families in their prime earning years or individuals with medium-term financial obligations.

Why is the 20-year term so popular?

• Family-focused coverage: Parents often select this term to ensure financial protection until their children are financially independent adults.
• Single-income households: For families relying on one breadwinner, a 20-year policy provides crucial support during the years when income replacement would be most needed.
• Covering major debts: This term can align with paying off a mortgage, student loans, or other significant financial responsibilities.

A 20-year policy strikes a balance by providing enough time for your loved ones to adjust financially without overpaying for unnecessary coverage.

30-Year term life insurance

For those with long-term financial commitments, a 30-year term provides the peace of mind that comes with extended coverage. This term length is especially beneficial for individuals at the start of major life milestones.

Who should consider a 30-year term?

• New parents: If you have young children, a 30-year policy ensures coverage until they’re financially independent.
• Homeowners with long mortgages: This term aligns with typical 30-year mortgage repayment schedules, protecting your family’s ability to stay in their home.
• Younger individuals locking in lower rates: By purchasing a 30-year policy in your 20s or 30s, you can secure lower premiums for decades, avoiding the higher costs of reapplying later.

This term length provides comprehensive protection for individuals with significant long-term responsibilities, offering stability through life’s unpredictable moments.

Other term lengths

While 10-, 20-, and 30-year terms are the most common, other options like 15- and 25-year policies exist to meet unique needs. These less common life insurance policy lengths allow for even more customization of your coverage.

• 15-year term: Perfect for someone nearing retirement who still has some financial obligations, like a car loan or mortgage.
• 25-year term: Ideal for parents of toddlers or young children, covering them through college and into early adulthood.

Factors to consider when determining coverage duration

Here are some key considerations to keep in mind when choosing the length of your insurance coverage.

Age

Your age plays a critical role in determining the duration of your life insurance policy.

• Young adults (20s-30s): If you’re just starting your career or building a family, longer-term policies like 25 or 30 years make sense. These terms provide coverage through pivotal life stages, such as raising children or paying off long-term debts like a mortgage.
• Middle-aged adults (40s-50s): At this stage, you might need a 10- or 20-year term, depending on your financial obligations and whether you still have dependents at home. Shorter terms can cover specific needs, such as paying off the last years of a mortgage or supporting teenagers through college.
• Seniors (60s+): If you’re nearing retirement or already retired, a shorter term may suffice to cover remaining debts or provide a financial cushion for a spouse. For some seniors, life insurance is less about income replacement and more about ensuring peace of mind.

Financial obligations

Your financial commitments should align closely with the length of your life insurance policy.

• Mortgages: A 30-year term is ideal for a new homeowner, as it ensures your family can stay in the home even if you’re not there to make the payments.
• Student loans: If you’re a co-signer on a student loan, make sure your term length lasts until the loan is paid off.
• Car loans: For shorter-term financial obligations, a 10- or 15-year term might be enough to cover the duration of the debt.
• Other debts: If you have multiple financial responsibilities, calculate their payoff timelines and choose a policy that encompasses all of them.

By matching your policy length to your financial obligations, you protect your loved ones from shouldering these burdens unexpectedly.

Dependents and family needs

The number and age of your dependents significantly influence the term length of your policy.

• Young children: Parents with infants or toddlers often opt for 20- or 30-year terms to ensure coverage until their children reach adulthood and financial independence.
• Teenagers: For parents with older kids, a 10- or 20-year policy can bridge the gap until their children are out of college and on their own.
• Spouses and elderly parents: If your spouse or aging parents rely on you financially, consider a term that lasts as long as their dependency.

Think about your family’s future and how long they might need financial assistance if you’re not around to provide it.

Retirement and savings goals

Your retirement plans and savings strategy also impact how long your life insurance coverage should last.

• Coverage until retirement: If your goal is to replace your income only until you retire, select a term that aligns with your retirement timeline.
• Post-retirement needs: Life insurance can serve as a financial safety net even after retirement.
• Building wealth: Some people use life insurance as part of their wealth-building strategy, ensuring that their beneficiaries receive a payout that complements other financial assets.

Advantages of longer-term lengths

Opting for a longer-term life insurance policy can provide significant benefits, particularly if you secure it early in life. Let’s explore why choosing a longer term could be a smart move for your financial future and your family’s security.

Financial stability at a younger age

When you lock in a longer term while you’re young and healthy, you typically enjoy lower premiums for the duration of the policy, effectively shielding yourself from the higher costs associated with age or potential health changes. A 30-year term, for instance, can offer decades of predictable premiums, which simplifies budgeting and provides peace of mind.

Security through uncertain times

Life is full of surprises, both good and bad. A longer-term policy ensures that your family is financially protected through major life events, such as raising children, paying off a mortgage, or transitioning into retirement. These policies are an enduring safeguard, even during periods of economic uncertainty or unexpected challenges.

Avoiding the need to renew

Shorter-term policies might require you to renew or reapply when the term ends, potentially at higher rates due to your increased age or health conditions. A longer-term policy eliminates this hassle, guaranteeing uninterrupted coverage for decades without the worry of rising costs.

Building a strong foundation

A longer term provides the stability to focus on achieving long-term financial goals, knowing your loved ones are protected. It’s an investment in your family’s future, giving them the time and resources to thrive, no matter what happens.

The benefits of laddering your policies

Laddering life insurance policies is a smart strategy that uses multiple policies with varying term lengths to align your coverage with your financial responsibilities as they change over time. This approach ensures that you have the right amount of coverage when you need it most and can help you avoid paying for unnecessary coverage later.

Here’s how it works: instead of purchasing a single long-term policy to cover every possible need, you layer shorter-term policies that match specific financial goals. For example, one policy might cover the early years of raising children, another might address the costs of higher education, and a third could protect against long-term obligations like a mortgage. As your obligations decrease—such as kids graduating or debts being paid off—your coverage naturally reduces, along with your overall insurance costs.

This method offers two key benefits.

• Cost savings: Laddering often results in lower premiums than maintaining a single large policy for an extended term. By tailoring coverage to your needs, you avoid paying for more insurance than necessary.
• Flexibility: Life changes, and so do your financial priorities. Laddering gives you the flexibility to adjust your coverage as your responsibilities evolve.

While laddering isn’t a widely advertised option, it’s a financially savvy move for many. To find out if it’s the right fit for your life plan, reach out to an SBLI Life Insurance Professional today. You’ll not only plan for the unknown but also build a secure future for your loved ones.

Determine your coverage needs with our coverage calculator

Ready to take the next step in securing your family’s future? Whether you’re exploring term lengths, considering laddering, or just starting your life insurance journey, we’re here to guide you every step of the way.

Contact SBLI today for personalized guidance from our life insurance professionals or try our coverage calculator to help estimate how much coverage you may need.