Is 20-Year Term Life Insurance Worth It?

Choosing the right life insurance plan to help protect your family starts with asking the right questions. 

Do you have a house payment or student loans? Do your kids play sports or go to camp every summer? What kind of lifestyle would you want your family to have in your absence? 

Life insurance, like any other insurance, is a source of protection (and peace of mind) for unexpected events. Carving out time to answer these questions can help you land on the coverage that would best help your family in your absence. 

Term life policies are one approach to help ensure that the people you love most can remain financially stable if you pass away during your working years.

What Is a 20-Year Term Life Insurance Policy, and How Does It Work? 

There are two major kinds of life insurance policies: whole and term life insurance. While whole life insurance would benefit your beneficiaries no matter when you pass away, term life insurance provides coverage for a specific time period, such as 10, 20 or 30 years.

Twenty-year term life insurance is an agreement between you and an insurer that for the span of 20 years, your risk of death will be covered. (That is, as long as your policy is paid and up to date, and as long as you meet their criteria for what’s covered. For example, that includes not misrepresenting yourself on your life insurance application.)

If you apply, are approved and purchase a 20-year term life insurance policy when you’re 35 years old, your beneficiaries would be covered if you passed away between ages 35 and 55. During that period, you’d pay monthly or annual premium payments to the insurer. 

Certified Financial Planner Dave Lowell, founder of Up Your Money Game, says that 20-year term policies are so attractive and practical because they tend to offer great value for a relatively low cost. 

“You can get a lot more coverage for a lot less money with a term life policy because you’re not paying for anything else except coverage in the event of death,” Lowell says. By contrast, whole life policies often provide additional benefits, like built-in savings components that grow over time, or the ability to take out loans from the policy. As a result, they tend to be much more expensive.

It's worth noting that there are a few different types of whole life insurance, including universal life and permanent life insurance, making it more complicated than term life insurance coverage.

Who Should Apply for a 20-Year Term Life Policy?

Unlike whole life insurance, term life policies expire when the term ends. But for some people, that might not be a problem.

Term life insurance can help protect those who rely on your financial contributions—like your spouse and children—during the years when they need you most. For example, if you have young kids who rely on you, you’d probably want to choose a term that would cover them until they (hopefully!) become financially independent.

“At the bare minimum, you want to choose a policy that provides for your family in the event of your passing,” Lowell says.

Twenty-year term life insurance might make sense for you, he says, if you predict that people will depend on you financially for another 20 years or so. For example, if you have a new baby, this would cover your family until your baby is 20 years old. 

If that feels right to you—your child might be mostly through college, hopefully on the road to getting a job and becoming independent—then a 20-year term could make sense. If you wanted to provide for longer than that, then you might want to consider a longer term length instead.

As your term insurance policy is nearing the end of the term period, you usually have the option to extend it, assuming you meet your policy requirements. That means that your premium contributions are paid and current, and you meet the criteria for what's covered.

Alternatively, if your child is already 5 years old, you might decide that a 20-year term is just right, since it’d get your child through to age 25. (Struggling to decide how to choose life insurance to cover multiple children? We've got you.)

Weighing Your Liabilities for a 20-Year Term

It’s also important to think about your liabilities when you’re considering 20-year term life insurance. If you have 20 years left on your mortgage, a 20-year policy could ensure your family isn’t burdened with the mortgage (or forced to sell the home in order to pay the mortgage) if you passed. The same principle applies to other debts that could linger even after you pass away, like car payments and student loans.

Lowell recommends considering lifestyle along with financial obligations and income. For instance, a $500,000 policy may be enough to replace the income you would’ve contributed were you still around, but a bigger policy might allow your beneficiaries to cover additional final expenses. That could include funeral costs, debt repayments, college costs for your kids and even the ability for your spouse to take time off of work if necessary. 

“There’s a ‘need’ side with life insurance, where you need to provide income to your family if you pass away, but there’s also the ‘want’ side,” Lowell says. “What kind of life do you want for your family if you pass away?” 

In many cases, partners will want to think through these questions together about term coverage. Here's what you should know if you're shopping for life insurance as a couple.

How Much Does 20-Year Term Life Insurance Cost?

A lot of people assume that life insurance premiums are expensive, but they may not be as costly as you’re imagining. (Read up on the truth behind more common myths about life insurance.)

The price tag of a 20-year term insurance policy can depend on several variables, like your age, gender, location, health and whether or not you smoke. Generally speaking, the riskier the insured person is in the eyes of the insurer, the more it’ll cost to be covered and the higher the life insurance rates will be. For example, if you’re a smoker in your 50s, you’d have higher life insurance premiums than a younger person in better health. (In some cases, insurers may also decline to offer you coverage.)

For a general sense of what a 20-year term policy might cost you, here’s a breakdown of prices. These are just illustrative examples, based on a 30-year-old, non-smoking male in excellent health (who gets assigned to the rating class of UltraSelect, the best rate class offered) from Minnesota, using quotes from the term life insurance offered by Fabric.

• $100k in coverage - $15.88/month

• $150k in coverage - $19.47/month

• $200k in coverage - $23.07/month

• $250k in coverage - $20.27/month

• $300k in coverage - $22.58/month

• $350k in coverage - $24.89/month

• $400k in coverage - $27.21/month

• $450k in coverage - $29.52/month

• $500k in coverage - $27.91/month

• $600k in coverage - $31.75/month

• $700k in coverage - $35.59/month

• $750k in coverage - $37.51/month

• $800k in coverage - $39.44/month

• $900k in coverage - $43.28/month

• $1m in coverage - $44.11/month

Does a 20-year term policy sound like a good option for your family? Apply for term life insurance online, in minutes.

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