by Chris Huntley
People who have families and those who are single want to ensure they have the means to at least cover their debts and funeral expenses should they perish unexpectedly.
Also, many people want their loved ones to have a financial legacy to help cover the costs of their children’s education, mortgage payments, debts, and to have a financial safety cushion.
A life insurance policy is one of the best ways to address these concerns, but with so many choices, you might find it difficult to choose which type of policy is best for your circumstances.
For those people who are in certain age groups, have limited financial circumstances or who are seeking a short term policy to bulk up their existing life insurance policy, a 10 year life insurance policy can be an ideal choice.
This article will explain:
- 10 Year Term Life Insurance
- How coverage works
- Who should buy 10 year term
- How to use it to insure a mortgage
- and list other advantages to this common policy
10 Year Term Life Insurance Explained
This type of policy is brand of Term Life Insurance. This form of life insurance covers you and offers guaranteed level premiums for a specific period of time known as a ‘term’. Terms can vary for this type of life insurance policy and can range from 5, 10, 25 or even 30 years.
A term life policy differs from a ‘Permanent Life Insurance’ type of policy, which includes Whole Life, Universal and a Variable Life insurance policy in that there is no investment or cash value options, and term insurance is generally used to cover a short term need, rather than coverage for life.
So, a 10 Year Term Life Insurance policy would cover you for a period of 10 years without your premiums increasing during that period. Depending on the policy, it will either expire, be renewed, or can even be converted into a universal life or Whole Life Insurance policy. It just depends on your particular needs.
What Does a 10 Year Term Life Insurance Policy Cover?
A Term Life Insurance Policy is your most basic life insurance policy.
In essence, it strictly covers the policy holder for a defined death benefit which is only paid to your beneficiary should you die during the term of the policy. The amount of death benefits available varies.
The best thing to do is to sit down and do some number crunching to see what your loved ones would need before deciding on what death benefit amount is most suitable. It may also depend on what you can afford. A more expensive death benefit will result in a correspondingly higher premium.
The death benefit paid out under a 10 year Term Life insurance policy, like all other life insurance policies, is income tax exempt. The death benefit is non-taxable (except in the case of estate taxes.)
Who Should Buy a 10 Year Term Life Insurance Policy?
This type of policy is very suitable to people for different reasons. If you are just starting out in your early 20’s and need some life insurance to tie you over until your economic circumstances are more stable, then this can be an ideal start.
It is also a very suitable policy for people who are in their late 40’s and 50’s, or nearing retirement. They can use this
policy to cover to cover children who are just about to enter college or university, or nearing the completion of the mortgage payments on their home.
Use a 10 Year Term Life Policy Instead of Mortgage Insurance
If you just bought a home, you know you need insurance to cover the mortgage. Many lenders sell mortgage insurance to their clients. Although, mortgage insurance may seem like a good idea, that may not be the case. The reason is that mortgage insurance is a form of decreasing term life insurance. The coverage corresponds to the amount you owe on your mortgage. As your mortgage is paid down, so does your amount of coverage.
Additionally, with many types of mortgage insurance, the bank is the beneficiary, not your family. And, not only do the premiums stay the same, the premium for mortgage insurance also tends to be a lot more expensive than what you pay for a term life policy.
And while 10 years may not be as long as your mortgage, you will have the option at the end of the term to buy a new policy, convert the policy, or pay renewal premiums. If you prefer coverage for a longer period of time, you might consider a 20 or 30 year term policy.
Other Advantages of a 10 Year Term Life Policy
Other advantages include:
- Convertible – Most policies allow you to convert your term life policy into a Whole Life insurance policy, and often without the need for a medical examination. However, you should always confirm that with your agent.
- Renewable – Most policies are automatically renewed at the end of the term.
- Affordable – Term life insurance is the cheapest form of life insurance available. It’s great when you are just starting out, or if you’re older.
- Supplement Insurance – This type of policy can be used as a convenient supplement to your existing life insurance to temporarily cover you for a short period of time to ensure you have enough coverage.
- Medical Exam Exempt – There are many policies you can purchase without the need to undergo a medical exam, but again, talk to your agent first. A lot of the lowest priced policies do include exams.
Will my premium payments go up or stay the same?
Level term policies calculate the premiums for the life of the policy, then charge the avg. of that amount per month. So, no, your premiums will remain the same throughout the 1o year duration.
Which insurance company offers the best rates on term insurance?
Well, it’s difficult to make a blanket statement answer to that question, since the best deal will differ from policy type to policy type, and from client to client, depending upon the specific variables of their health, age, and lifestyle. But I can tell you that to find the best deal, you should work with an independent agent who has access to all of the major insurance carriers, and who will shop around for you to find you the best deal.
I hope you have found this article helpful. For quotes on 10 year term life insurance, use our quote form on the right or feel free to call us at 877-443-9467 .
*Written by Chris Huntley. Huntley Wealth Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.