You probably know you need life insurance when your kids are born, since it’s a way to help replace your financial contribution if you were no longer around. But as your kids get older and your debts and income change, it may be worth reevaluating your life insurance.
Certified Financial Planner Jake Northrup, founder of Experience Your Wealth, recommends families revisit and reconsider their life insurance after every major life transition.
For example, milestones like kids starting elementary school, borrowing money for a home purchase or taking out an auto loan can be triggers for a conversation about life insurance.
“As your situation evolves, so do your insurance needs,” he says. “I recommend clients check out their insurance every few years, or during any life transition.”
Everyone is different. Here are some cases in which a 15-year term life insurance policy could help offer the protection your family needs.
Life insurance is a contract between you and an insurance company indicating that if you were to pass away, your beneficiaries (the people you choose) would receive a certain amount of money. That's known as a death benefit.
Life insurance usually comes into play when you have financial dependents, or people who count on your money in order to get by. Most often this means children, but it could include any other family members you care for, or even friends. Term life insurance payouts can be used to cover just about anything, from funeral costs to debt repayments.
As a result life insurance is a key way to help protect your loved ones in case something were to happen to you.
Not all insurance policies are created equal. Term life insurance is one way to help ensure your family has the financial provision needed to cover expenses during a certain span of time.
While whole life insurance (also known as "permanent insurance") would cover your beneficiaries at the amount you choose no matter when you pass away, term life insurance provides coverage for a specific period of time, like 15, 20 or 30 years. (Here's more on the difference between term and whole life insurance.)
Let’s say you purchase a 15-year term policy when you’re 35 years old. As with any insurance, you’d pay a monthly or annual premium. Assuming your policy is paid and up to date—and you meet your insurer’s criteria for what’s covered—your beneficiaries would be covered if you passed away between age 35 and 50.
Your life insurance beneficiary can use the death benefit from a life insurance policy pretty much however they want. This could include things like:
The cost of living, like health insurance and groceries
Remaining payments on a mortgage
Debts like credit card payments
Student loans (either for themselves or debt you've left behind if you had a co-signer)
Funeral costs for you
Big medical bills you might have left behind if you passed away after an extended illness
Compared to whole life, term life insurance tends to be significantly more affordable, since it covers you for a specific period of time rather than forever. In this case, you'd have the benefit of shorter-term coverage.
For example, maybe you want to provide for your family for the duration of your car loan or mortgage. That way, if you were no longer here, they wouldn't be faced with the need to sell off the car or the house to cover the payments. But when those things are paid off, you might not still need or want coverage. Term life insurance can help you protect your family for a specific duration of need.
Your ideal term length will depend on where you're at as a family now, and what you have in store for the future. While it's obviously difficult to predict perfectly, this is your chance to take your best guess. If you go for a policy that's too short, you may find that at the end of the term you still have a need for life insurance (at which point it will likely be more expensive to get additional coverage). On the flip side, if you go for a policy that's longer than you need, you'll pay more than necessary in monthly premiums.
Wondering which term life policy could best help protect your family’s ever-evolving needs? If you see yourself in any of these scenarios, consider applying for a 15-year term policy.
If your kids are in elementary school, a 15-year term life insurance policy could help financially cover them through those years. Additionally, funding your child’s education may be important to you. Term life insurance is one way to help make sure your kids have the resources they need for college and, potentially, beyond.
“Anyone with kids in the 8 to 10 year range should evaluate if their kids’ future needs will be met, especially with rising tuition costs,” says Northrup. “The likelihood is you’re probably under-insured.”
If your kids are younger than that and you want coverage until they’re college-aged, you might consider a 20-year term life insurance policy instead.
Anyone with private student loans should consider purchasing term life insurance to protect against the entire student loan balance becoming due at their death.
Unlike federal student loans, which are forgiven in the event of the borrower’s death, most private student loans contain provisions that the entire loan balance is due if the borrower passes away.
So, if you had a co-signer, that person will almost always be fully responsible for the balance after you pass away. And even without a co-signer, lenders generally pass on the balance of a student loan to your estate, which could reduce the value of what you pass on.
“This is often overlooked and could result in a very unpleasant surprise for your loved ones if you aren’t careful,” says Northrup.
Think about your long-term financial goals. Do you and your partner want to travel through Europe? Renovate your house? To accomplish these things, will you need your income for at least 15 more years?
If so, a 15-year term life insurance policy could help provide your spouse or partner with a financial buffer so those goals can become a reality, even in the absence of your income.
If you have “financial goals contingent upon you earning income for at least 15 more years, you should have, at a minimum, a 15-year term life insurance policy to protect against you passing away,” Northrup says.
Your mortgage is another debt your family would likely need to deal with if you passed away. If you own a home with about 15 years left on the loan, you might want to consider a 15-year term policy.
“I always recommend spouses go through the exercise of ensuring one of them could still get by without the other person’s income,” Northrup says. “If your spouse would come up short on the mortgage without you, it may be time to evaluate if you’re properly insured.”
It’s always best to pay off high-interest debts like credit cards and car loans. That said, Northrup says people should factor in these debts when they’re shopping for life insurance.
“I’d always emphasize paying down these types of debt short term, but it’s important to have enough income protection to cover those things, too,” says Northrup.
If you think it’ll take around 15 years to pay off any kind of debt you owe, then consider getting enough term life insurance to cover it.
The best policy and term length for you will depend on your individual needs and situation. In this case, you might write down your financial obligations and what your family would need money-wise in your absence. Then figure out how long they would need this support.
Do you want to leave behind enough money to get your kids through college? Will you no longer need that level of protection once your kids are past college age? Do you care for aging parents? It may be morbid to contemplate, but realistically do you imagine needing this backstop of support for your folks for longer than the next 15 years?
This could be a wise option for you and your loved ones if you have a specific, short-term period of financial need, such as the time until you hit retirement or until your kids are done with school. If you predict that your financial needs will last longer than 15 years, you might consider a longer term length.
There are lots of life insurance policies under the sun, but with a "level premium" policy like the term life insurance offered by Fabric, your premiums are fixed. That means that you'll get a rate once you start your policy, and your premiums will be unchanged throughout the 15 years of your term.
That depends. In the traditional life insurance world, you would've needed to undergo a life insurance health exam. But more companies, including Fabric, are offering no-exam life insurance policies that let you skip the exam by using algorithms to help assess your risk levels in other ways.
When your term is up, you have a few options. If you do nothing, your insurance would expire and you'd no longer be covered. And if you no longer have the same financial needs (for example, you're no longer caring for your aging relatives or your kids have graduated), then that might be just fine.
If you still had a need for life insurance at the end of your term, you could choose to extend your coverage, although you will generally need to pay more for your premiums as you would be assessed for your risk levels at your current age, which is 15 years older than when you first applied.
In many cases, you may also have the option to convert your term policy into a whole life policy.
The price tag for 15-year term life insurance probably isn’t as hefty as you think.
Typically, the higher your risk of death, the more your insurance will be. The cost of a 15-year term insurance policy can depend on variables including your age, gender, location, health and whether or not you smoke. A 55-year-old who smokes would likely pay a higher premium than, say, a generally healthy 35-year-old.
To get an idea of what a 15-year term policy might cost you, here’s a breakdown of prices. These are examples based on a 35-year-old, non-smoking male in excellent health (this reflects a rate class of UltraSelect, the best option we offer) from Oregon, using quotes from Fabric’s term life insurance offering.
$100k in coverage - $15.88/month
$150k in coverage - $19.47/month
$200k in coverage - $23.07/month
$250k in coverage - $18.72/month
$300k in coverage - $20.73/month
$350k in coverage - $22.73/month
$400k in coverage - $24.74/month
$450k in coverage - $26.74/month
$500k in coverage - $24.99/month
$600k in coverage - $28.24/month
$700k in coverage - $31.50/month
$750k in coverage - $33.13/month
$800k in coverage - $34.76/month
$900k in coverage - $38.02/month
$1m in coverage - $38.14/month
If a 15-year term policy sounds like a good fit for your family, you can apply for term life insurance online, in minutes.
Fabric exists to help young families master their money. Our articles abide by strict editorial standards. This article has been reviewed and approved by a compliance professional who is a licensed life insurance agent.
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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