Sometimes, parenting can feel like a marathon. There are the hazy newborn days and the endless nights of no sleep. Then the potty training mile marker, and your kids’ training wheels finally come off their bikes.
Once you’ve found your footing in the parenting race, you may also be more established in your career and finances. How can you help protect your assets and ensure your family’s financial situation is secure, even in the event of your passing?
Term life insurance, which provides coverage for a specific period of time like 10, 15 or 20 years, is one way to provide an extra sense of security until you finish your financial “race.”
The goal of any term policy is to choose a term that lasts the same amount of time as your financial obligations. Not sure where to start? Raymer Malone, a Nevada-based Certified Financial Planner and founder of High Income Protection Insurance Agency, recommends anyone looking into a term policy ask two questions: What am I trying to protect, and how long do I need it protected?
That’ll help you figure out how much life insurance you actually need.
Wondering if a 10-year term policy might be right for you? Ask yourself the following questions.
Do you have kids? Term life insurance is often most useful during the period when people are most dependent on you financially. For many people, that means the time when they’re raising kids.
Ideally, by the time your policy expires, your family will be better situated financially—with a nest egg you’ve built up in the meantime, and fewer obligations because your kids will be older.
Consider how long it will be until your kids are (hopefully!) financially independent. If the answer is “about 10 years,” then a 10-year term could be the right fit for you. If it’ll be longer, a 15-year term or 20-year term life insurance might be a better choice.
For example, if you have an 8-year-old, a 10-year policy would cover you until your child becomes a legal adult. Does that feel appropriate to you, or would you want to cover them for longer?
If you have a preteen or teenager, the benefit from a 10-year policy could help take care of expenses like college tuition and post-college living costs. “If you outlive the policy,” says Katia Iervasi, an insurance expert at Finder, your insurance policy will “expire just as your children enter the workforce and start earning their own money.”
On a similar note, if you’re the breadwinner for your spouse, think about how long it will be before they can rely on Social Security instead of your income.
The same goes for aging parents, according to Iervasi. If you’re covering medical expenses or paying for a nursing home, figure out how long you’ll need to do that for before Social Security kicks in.
Remember: Term life insurance is designed to drop off at the same time as your obligations. So in some cases, you may only need 10 years of coverage before the government steps in to compensate you for years of hard work.
Part of providing financial security for your dependents is ensuring they aren’t left to deal with your debts. That’s why many people choose a term length that matches the time they have left on their mortgage or other liabilities, like student loans or car payments.
If you have 10 years left on these debts, a 10-year term life policy can take care of the repayments if you die prematurely.
Life insurance is meant to replace your income, so in theory, you’ll need less coverage the closer you get to retirement.
Malone says he commonly recommends 10-year term insurance to clients who are in their fifties or have about 10 years left in the workforce. That’s because they’re nearing the end of their “financial race,” and they want some additional protection for their spouse and kids if they pass away before they can draw from retirement savings.
“Ten-year term insurance fits a certain group of clients, which I call ‘20 milers on their financial marathon,’” he says. “They’ve made it most of the way through their run, so it’s imperative they don’t fall down or give up right before the finish line.”
One thing to keep in mind: In your fifties, term life insurance tends to get more expensive. That means it may not be the best option for every scenario. For example, for a policy offered through Fabric, a 55-year-old in excellent health in Connecticut might pay about $60 a month for a 10-year term policy with $500,000 in coverage.
If you need the financial buffer, it may be worth the investment. But if you’re close enough to the “finish line” that your family could get by on savings and investments rather than a life insurance policy that you’ve taken out later in life, it might be a better idea to simply save the amount your monthly premium would’ve been, instead of investing in a policy.
Life insurance is definitely an investment, but it’s likely not as costly as you’d think. The price of a 10-year term insurance policy can vary based on several variables, including your age, gender, location, health and if you smoke.
The monthly premium cost generally increases with a person’s risk: If you’re a smoker in your fifties in poor health, you’ll almost certainly pay more for a premium than someone younger and healthier.
Here’s how 10-year term costs break down for a 40-year-old non-smoking female in excellent health in Michigan, based on quotes from Fabric:
$100k - $15.47/month
$150k - $18.85/month
$200k - $22.23/month
$250k - $19.14/month
$300k - $21.23/month
$350k - $23.32/month
$400k - $25.40/month
$450k - $27.49/month
$500k - $25.61/month
$600k - $29.00/month
$700k - $32.38/month
$750k - $34.07/month
$800k - $35.76/month
$900k - $39.14/month
$1m - $38.98/month
Fabric exists to help young families master their money. Our articles abide by strict editorial standards.
This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific financial advice or to serve as the basis for any decisions. Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want a easy and fast way to purchase life insurance.
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Fabric Instant is an Accidental Death Insurance Policy (Form VL-ADH1 with state variations where applicable) and Fabric Premium is a Term Life Insurance Policy (Form ICC16-VLT, ICC16-VLT19, and CMP 0501 with state variations where applicable). Policies are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by Vantis Life Insurance Company of New York, Brewster, NY (NY only). Coverage may not be available in all states. Issuance of coverage for Fabric Premium is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.
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