10-year term life insurance
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Term life insurance is a generally cost-effective way to help protect family finances if you pass away and can no longer provide for them. And among term life policies, 10-year-term life tends to be especially cost-effective — but there are potential trade-offs you should know about before purchasing. This article can help you decide if this kind of coverage is something you should consider and answer some key questions, including:
What is term life insurance?
What is a 10-year term life insurance policy?
What are the potential benefits and drawbacks?
What is term life insurance?
If you're considering getting a life insurance policy, one of the first things to know is there are two basic types of coverage — permanent life insurance and term life insurance.
Permanent life insurance (whole life insurance or universal life insurance) never expires. Your coverage lasts for life as long as premiums are paid — whether you pass away at age 50 or 100. It also features a tax-efficient cash value component, which can help build family assets that can be used while you're still alive. Permanent policies can also provide many other advantages — but are relatively costly.
A term life insurance policy provides financial protection for a limited period, usually 10, 20, or 30 years. It's a straightforward and cost-effective option if you want temporary coverage to protect your dependents in the event of your death. Term life policies provide a guaranteed death benefit to your beneficiaries – usually as an income tax-free lump sum – if you pass away during the term.1 But once the term ends, the coverage ends, and there's no value left. At that point, you may have one or more of the following options, depending on your specific policy:
Renewal: While many term policies have "guaranteed renewable" provisions, it probably doesn't mean what you think. While you can renew the policy at the end of the term, life insurance companies can also raise the premium – by a significant amount. Typically, it's only worth renewing a 10, 20, or 30-year term life insurance policy if you have been diagnosed with a very serious health issue and aren't likely to qualify for other coverage. If you are in good or even reasonable health, it will almost always be more cost-effective to reapply for new coverage.
Reapply for coverage: You can apply for a new policy if you need to extend coverage, but even term life insurance rates may be higher since they'll be based on your age at the time of renewal, and you'll probably need a new medical exam. If you've been diagnosed with a condition like high blood pressure or diabetes, rates could be significantly higher – even if the condition is well controlled. And with some conditions, there's a chance that you may not be approved for convention coverage at all.
Conversion: Many term life policies come with a “conversion” rider (i.e., option),2 which allows you to convert the policy into a permanent whole or universal life insurance policy without the need for a new medical exam. This can be a valuable option if you want to maintain coverage beyond the initial term. However, after you convert to permanent coverage, your life insurance rates may be significantly higher than before. Also, you have to check the terms of the specific policy rider: in many cases, it's only in effect for the first few years of the policy – if you wait until the last minute, you may not be able to convert the policy.
How a 10-year term life insurance policy works
Simply put, it's a term life insurance policy with a 10-year term or coverage period. Should you pass away during the 10-year term, your beneficiaries will receive a lump-sum, income tax-free death benefit that can be used in any way they see fit: to cover daily living expenses and other obligations, pay off a mortgage, or even pay college tuition.
Key advantages generally include:
Fixed premiums: The premiums for this type of policy are almost always “level,” meaning they remain the same throughout the 10-year term. This allows for predictable budgeting. However, your life insurance rates will likely be significantly higher if you extend coverage later.
Cost-Effectiveness: Compared to 20-year or 30-year term policies and permanent life insurance, a 10-year term policy is usually the most cost-effective option for a specific death benefit.
Simplicity: 10-year term life insurance is easy to understand and straightforward. There are no complex investment components, cash value, or policy loans to manage.
Flexibility: You're not locked into a long-term commitment, and you may be able to convert to a permanent life insurance policy without the need for a medical exam. And if you decide to apply for new coverage after 10 years, you may still be able to find cost-effective options.
However, there are also potential disadvantages:
Shorter-term life insurance protection: This is among the shortest-duration level-premium life insurance options available.
Higher long-term costs: A 10-year term policy almost always has lower monthly premiums than a 20-year term policy. However, if you decide to apply for a new 10-year policy when it expires, your overall cost for the two consecutive policies will almost always be higher than it would have been for a single, 20-year policy.
No cash value: Like other term policies, this type of policy does not build cash value. Only a permanent life policy - whole life insurance or universal life policy - builds cash value.3
How much a 10-year life insurance policy can cost
Here’s a breakdown of the average monthly costs for a $500,000 term life insurance policy by age and gender for non-smoking applicants in excellent health. But remember, these are average costs, and when you purchase a policy, the life insurance company will set the actual rate you pay based on factors unique to you and your needs:
Age | Gender | Monthly premium |
|---|---|---|
20 | Female | $17.39 |
Male | $22.52 | |
30 | Female | $16.71 |
Male | $21.13 | |
40 | Female | $23.98 |
Male | $29.28 | |
50 | Female | $51.80 |
Male | $63.97 | |
60 | Female | $107.24 |
6 | Male | $144.34 |
Source: Term life insurance rates , Policygenius Oct 2024
One of the key benefits of term life insurance coverage is cost-effectiveness. When compared to longer-term policies and permanent life insurance, 10-year-term life insurance policies are among the most cost-effective of all options.
How cost-effective? As you can see, a healthy 40-year-old male can get $500,000 of coverage for about $30/month. A 40-year-old female can get the same policy for about $24/month. And because life insurance tends to be even more cost effective in higher amounts, those same male and female applicants can pay under $60/month and $48/month, respectively, for a $1,000,000 policy. But again, it’s important to remember that your life insurance cost will vary depending on your age, health status coverage amount, and other factors.
Is a 10-year term life insurance policy right for you?
A 10-year term life insurance policy is a simple, cost-effective coverage option. But is this relatively short-duration coverage option right for you and your dependents? It may be most appropriate for:
Parents of teens. If you are the parent of teenagers, a 10-year term policy with an appropriate death benefit can help ensure that, in the event of your death, they will still have funds for college tuition and will be financially protected until they are able to support themselves.
Families with outstanding short-term debt. If you are responsible for significant debt payments over the next few years, such as an auto loan or student or personal debts, a 10-year term policy can help ensure that your spouse or partner can meet those obligations without your income.
People on a tight budget. A 10-year term policy can be a cost-effective option for individuals or families who need coverage but have limited financial resources.
Older people. People buying life insurance over age 50 who want to help protect their spouse or partner for a limited time may want to consider a 10-year term life policy.
People with existing overage. Some people with existing life insurance policies may want to add a 10-year term policy to supplement their coverage during a period when they anticipate additional financial responsibilities.
You’re a smoker and planning to quit. Smokers typically have higher rates for life insurance policies than non-smokers. If you are young and want life insurance but are planning to quit smoking, you may be able to get a ten-year policy to cover you for now and obtain a policy with lower rates after you quit.
Remember, it's important to assess your individual financial needs, goals, and circumstances when considering life insurance. If you have questions, consider speaking with a financial professional who can help evaluate all your options, including a 10-year term policy.
How to get a life insurance policy
A good way to start the process is by using an online quote tool from a reputable life insurance company, such as Guardian. If you're happy with the cost and coverage options quoted, the next step is applying for a policy. You'll typically be asked to fill out a form that asks for basic personal and financial information, along with a few health questions. You can also expect to have a paramedical exam: a health professional will typically come to your home or office, draw some blood, and perform a few other tests. After that, there's a short underwriting period in which insurance professionals evaluate your application. In many or even most cases, it will be approved at the rate quoted, but if an issue is found, there may be an adjustment to your rate or requested coverage amount. Assuming that's the case, your coverage will be quickly finalized, and you'll have the protection you want for your family.
Still have questions?
If you have questions — such as whether term coverage is something you should consider — take the next step: talk with an experienced professional who will take time to learn about your unique situation and explain the different options that may fit your needs and your budget. If you don't know a financial professional, ask your friends for a recommendation — or we can help you find a Guardian financial professional in your area. Remember, the younger and healthier you are, the less your policy may cost. So get started today.