Term life insurance is given its name because it lasts for a certain period of time. The length of the term for the policy will determine how long your coverage remains effective at a certain rate. There are pros and cons to picking short terms over long terms, so you need to weigh out your options before selecting a timeframe for your policy. Before you can do that though, you need to know what your limits are. What is the maximum term for term life insurance? What happens after that time? Let’s discuss life insurance terms a little closer to determine how long you should get your policy.
What a Term Really Is
Some people think that a term represents the amount of time a life insurance policy is in effect, and that is not necessarily the case. You can have the same policy after the term is over, but to do that, you will get a new rate to pay. Terms limit how long you get to sit at a certain annual premium before your rates have to go up. If you lock in a long term policy, you will most likely pay significantly less than what someone else would pay 10 years down the road. When it comes time to renew the policy, your rats will be reassessed accordingly. Then you can decide if you want to continue with the life insurance or not.
Term Life Insurance Maximums and Minimums
With most insurance providers, you can get a term life insurance policy for anywhere from 1 to 40 years. That second number may have to be reduced based on your age, depending on when you obtain the policy. For instance, may have a hard time finding an insurance company to cover you at the age of 65 if you want a 40 year policy. They know they will have to pay out eventually. The age requirements for term life insurance vary from one policy provider to the next, so you will need to do some investigating for the specific policy you want to have. That will tell you what your maximum term is going to be.
How to Choose the Right Term Length
Now that you have a feel for what your term limits are going to be, you need to figure out what term is right for you. There are several factors that will influence this decision, including:
- What you can afford: The longer the term on your policy, the more you will have to pay on it per month. That is because you are locking in a rate for an extended period of time. The insurance company will make more money if you have to renew in five years than they will if you renew in forty, so they have to charge a little more to make up the difference. You still save money in the end by getting a longer term, but you have to pay more each month. If you can manage that extra payment though, it’ll be worth the security over time.
- What you really need: If you are approaching retirement or you plan on investing in other life insurance policies in the future, you may not need your term life insurance for very long. Most people get a 10 year policy and then reassess their situation. If you want to plan for longer than that, you are welcome to. Just think about what your overall needs are.
- How old you are: The older you get, the harder it will be to find a long term policy. If you do manage to find one, you may have to pay outrageous money for it. Try to think about what is most cost effective for you as you get older, and if need be, put some extra money away each month on the side. That way when the term runs out, you still have something to give to your family.
- What you want to plan for: If you have no kids, spouse, or anything of the sort, you may not need a long term life insurance policy. This is mainly designed to help your family pay off your final expenses. If you do have a family, you need to think about where your life is headed with them. For instance, if the house is going to be paid off in 10 years, you may not need your current policy to last 30 years. Discuss this with your spouse and choose the best option for you.
The maximum term for term life insurance isn’t always the best one. Every person has a different set of needs to fulfill. Think about yours and start looking for a policy that can address them. You will have a great policy to look forward to in no time.