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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.”
At the most basic level, life insurance is intended to help your loved ones financially if you were to pass away. That way, if anyone depends on your income or financial contribution, they'd have an easier time without you.
Often, people choose a spouse or other family members as their beneficiaries. The funds from a life insurance benefit can be used for just about anything, from daily living expenses to funding college for your kids.
Here's more on how life insurance works.
There are two main types of life insurance: term and whole. With term life insurance, you're covered for a specific period of time (called a "term"). If you pass away during that time, the insurance company would pay out the death benefit to the people you've designated as your beneficiaries. If, however, you outlive that term, your policy expires and no longer covers you.
Whole life, by contrast, covers you for your entire life. It also has other features including a "cash value" component, which grows over time and enables you to tap into the money while you're still alive, as well.
So why would anyone choose term life? Mostly because it's a lot less expensive than whole life insurance. If you have children or other financial dependents who will eventually grow up and no longer need your help, term life insurance can be an affordable way to help safeguard them during this period.
Because it's one of the key ways to help protect young families at an affordable rate, this article focuses on term life insurance.
For more information, we created a detailed rundown of term vs. whole life insurance.
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.
Simply put, it's term life insurance set for a 10 year term. If you were to pass away during the 10 years while your policy was active, the insurer would pay the death benefit to the beneficiaries you chose. If not, your policy would expire and you could choose to renew at a higher rate or let it lapse.
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
Each person will have unique life insurance needs, but there are some broad categories of folks who might benefit from a 10-year term life insurance policy.
People with middle-school-aged children.
Soon-to-be retirees who want a financial bridge until they hit retirement in about a decade.
Those with mortgages that they plan to pay off in about 10 years.
People who expect to achieve financial independence in about that long, whether through the FIRE movement ("financially independent, retire early") or some other way.
This, too, will depend on your individual situation. A quick rule of thumb is to apply for at least five times your annual income. A more nuanced take involves calculating your financial obligations, what you'd like to cover if you were no longer around and how much it'd all cost.
Here are more details to help you figure out how much life insurance you need.
There are a few:
Affordability. Because this is one of the shortest term lengths out there, the monthly premiums tend to be lower than for other term lengths.
Short-term coverage. If you only need financial protection for a relatively short period of time, 10-year term could be a solid choice. For example, maybe you only have a few years left until all of your kids finish college, but you want to make sure they wouldn't have to drop out if you passed away while they were still in school. A 10-year policy might be the right term length to get your family through that particular period of need.
Flexibility. The term length is comparatively short. At the end of the term, you can choose to let the policy expire, or you can choose to renew (at a higher rate) or convert your policy into whole life insurance.
That depends on where and how you apply for insurance. Traditionally, most insurers required applicants to undergo a life insurance health exam in order to help assess how risky it would be to insure them.
But more companies are offering accelerated term life insurance, which means that you might be able to skip the exam yet still get fully underwritten life insurance at the same rates. Here's what you should know about no-exam life insurance policies.
If you apply for term life insurance through Fabric, you'll have the option to potentially skip the health exam if you are eligible to do so.
There isn't an objective yes or no answer to this because it depends entirely on your situation. Term life insurance is intended to help protect your family financially during periods of high need, such as your child-rearing years.
If that "period of need" is 10 years, then that's the right term length for you. If you have more like 15 years until your kids grow up or until you pay off your mortgage, then 15-year term life insurance could be a good fit. If it'll be 20 years before your children reach adulthood, then maybe you opt for 20-year term life insurance.
In some cases, someone might choose a shorter term like 10 years after they change jobs or face a reduction in income. For example, say you were making a high income at work but decided to quit your job to become a stay-at-home parent until your child is in elementary school. You might choose a 10-year term to cover your financial contribution during that period, because stay-at-home parents need life insurance, too.
You might decide to apply for this shorter term with the intention of reassessing your life insurance needs once you return to the workforce and have a different level of income and contribution to account for.
In some cases, you might get a life insurance policy that meets your needs at the time you applied... and then your life changes. Maybe you have an additional child, or maybe you get a more expensive mortgage that you'd want your spouse to be able to pay off in your absence.
Whatever the reason, some people decide that they need to supplement existing life insurance policies by adding additional coverage, adding time to their term or both. In these cases, you might choose a shorter term like a 10 years to layer on top of other coverage. That approach is sometimes called life insurance laddering. (Just note that not all companies that sell life insurance can support applicants applying for multiple active policies.)
In some cases, lenders may be happier to loan you money if they have a contingency plan for what would happen if you were to pass away. Some people may choose to pursue life insurance as a means of helping them land a loan, whether a personal or business loan, by reassuring the bank that it'll get its money back even if they were no longer here.
A level premium means that you sign up for a policy with a certain monthly premium and that amount doesn't change or go up during the lifetime of your policy. So, with a 10-year level premium term life insurance policy, you would have coverage for 10 years as long as you keep up with your payments and your policy remains in force, with no increases to your monthly premium.
The 10-year term life policy through Fabric has a level term.
Generally speaking, at the end of a given term, the insurance expires. So in the case of 10-year term insurance, it expires after 10 years. At that time, you have a few options. First, you usually you have the option to renew your coverage, convert your term insurance into whole life insurance or both.
Renewability means you can renew your coverage without additional evidence of insurability. You'll almost certainly pay a higher rate because you're now older, but you wouldn't need to go through another health exam and wouldn't be denied even if you've had some health issues in the intervening years.
Meanwhile, if your policy has a “convertible provision” then you're able to convert to a whole life policy without evidence of insurability. This too will cost more (because you are older than you were back then and because whole life tends to cost much more), but you wouldn’t have to prove your health status or go through the life insurance underwriting process again.
The third choice is to simply let the policy expire. If you planned well, then you would have chosen a 10-year policy to cover you for a decade when you experienced a real financial need such as raising children. Now that that period is over, your family's financial obligations may also be reduced and you may no longer need life insurance.
Psst. With Fabric, you can apply for a 10-year (or 15- or 20-year) policy totally online, without needing to speak to a salesy agent. The application only takes about 10 minutes and you might even be able to skip the health exam.
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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Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. Issuance of coverage for Term Life Insurance 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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