Ideally, your life insurance policy should last as long as your longest financial obligation. If you’ve done the math and realized you have just 10 years’ worth of financial obligations on your plate — like a mortgage or business loan — consider a 10-year policy. It’s also a popular option for people who are counting down the years until they retire.
How does a 10-year life insurance policy work?
A 10-year policy is a type of term life insurance. It lasts a decade, and the premiums stay the same for the life of the policy. If you die during the term, your beneficiaries will receive a payout from your insurer. But if you outlive the term, you’ll need to purchase another policy if you still need coverage — and your beneficiaries won’t get any money.
What happens after the 10-year term is up?
When your policy expires, so does your coverage. At this stage, there are a few options to choose from:
- Renew the policy. Do you still need coverage? If you’re under 70, you can opt to purchase a new policy before yours expires. The rate reflects the market rate as well as your age and health, so it will be higher. You may also have to take another medical exam.
- Convert the policy. Most term policies are convertible, meaning you can upgrade to a permanent policy — such as whole life — before a deadline. With most insurers, you can convert without providing extra evidence of your insurability, like taking another medical exam. While permanent policies are much more expensive, they offer lifelong protection and have an investment portion, so they suit people who want their policy to play a bigger role in their financial and estate planning.
- Let the policy lapse. If you no longer need coverage, no action is required. You’ll no longer have to pay premiums, and your family won’t receive any payout. You won’t be able to get your paid premiums back, but hopefully your finances have been shored up by then.
How much is a 10-year term life insurance policy?
According to our research, a 30-year-old nonsmoking man with $250,000 in coverage living in Los Angeles, California can expect to pay around $20 a month, or $16 a month for a woman. The rates for a smoker are higher, typically from $43 a month for a man and $35 per month for a woman.
Your premiums are locked in for the life of the policy, so aim to take out a policy as soon as you need it to get the best possible rate. It’s worth comparing 10-year life insurance quotes from a range of insurers, too, as prices can vary significantly. The rate you’re ultimately offered is a reflection of a range of factors such as your age, health, lifestyle, occupation and medical history.
Sample monthly rates for a $500,000 10-year term life policy
| Age | Man | Woman |
|---|---|---|
| 25 | $33.57 | $24.40 |
| 30 | $33.79 | $26.59 |
| 35 | $35.76 | $27.89 |
| 40 | $42.51 | $32.68 |
| 45 | $58.84 | $47.49 |
| 50 | $78.42 | $69.28 |
| 55 | $113.79 | $86.56 |
| 60 | $171.94 | $123.81 |
| 65 | $285.14 | $194.37 |
| 70 | $533.58 | $352.36 |
*Sample rates provided by Quotacy in 2019, and averaged from a subset of 12 life insurance companies.
How to buy a 10-year term life insurance policy
The process is the same as purchasing any life insurance policy. Follow these steps:
- Determine how much coverage you need. You know how long you want your coverage to last, so the next step is determining how much coverage you need. Assess your outstanding debts, assets and income, and aim to take out a policy with a monetary value to match.
- Research life insurance companies. You can either go directly to the insurer, or enlist an agent or broker to help you narrow down your options. Compare policy features, financial strength ratings and available riders, as well as minimum and maximum coverage amounts.
- Get quotes from your top insurers. For the best possible coverage at the lowest price, request quotes from a handful of insurers.
- Apply for your 10-year term life insurance policy. Once you’ve chosen an insurer, go through the application process. This typically involves completing a health questionnaire and taking a medical exam, and you’ll need to wait anywhere from a few days to a few weeks for the underwriters to assess your application.
- Sign off on the policy. When the underwriter approves your application, they’ll send you the policy documents to review. Read these carefully, and sign off if you agree with everything.
Do I need 10-year term life insurance?
Your life insurance policy should cover your longest financial obligation. So in short, a 10-year policy is suitable for anyone who has just a decade left of financial responsibility. It makes sense to purchase a 10-year policy in these situations:
- Protect your income. Do you have dependents relying on your income? A 10-year policy is cheap, and while it may not last long, it could be better than not having a policy at all. If you die, it will provide your family with the money they need to live, as well as pay off any remaining debts and cover your funeral expenses. You can also convert your temporary policy to a permanent policy.
- Pay off debt. If you have a 10-year mortgage on your home or have 10 years left to pay off your loan, you may only need a decade of coverage. By taking out a policy, you’ll have the peace of mind in knowing your family won’t be burdened with those payments if you die, or worse, have to move to a cheaper home.
- Cover your kids’ college costs. Maybe your kids are in middle school now and fast approaching high school and college. Either way, most people buy a policy that takes their children through college and into adulthood, when they begin working and earning money themselves. If there’s only 10 years before your children are in the workforce, this term may suit you.
- Plan for retirement. Seniors in their late 50s and 60s who are edging closer to retirement tend to opt for a 10-year policy. At this stage of your life, you’re probably in a good career position and funneling more money into your savings accounts and 401(k). A term life policy can protect your income through the last of your working years and any financial responsibilities that may crop up, such as buying a vacation home.
- Supplement your existing policy. Say you planned ahead and bought a $250,000, 25-year term policy when you were younger. Ten or 15 years later, you have a mortgage, a business or another kid, and you’re underinsured. You can ladder your life insurance by purchasing an additional policy to protect your family from new or ongoing financial obligations.
- Secure a loan. You can secure a business loan with a life insurance policy. This collateral reassures lenders that you have every intention to pay back the money — even if you die.
Who shouldn’t get a 10-year term policy?
It depends on your financial situation and where you are in your career. Ideally, your life insurance policy should cover your longest and most expensive financial obligation, or take you up until your retirement. That way, if you die before, your family won’t be responsible for your debts, and your policy will provide the income they need to live.
You might consider a different term length if you have more than 10 years left on your mortgage or until retirement. If you have a 15-, 20- or 30-year mortgage, look into a policy that covers those payments, such as a 20-year term or 30-year term. Remember, your debt doesn’t die with you, so if you die, your family will be responsible for making those payments.
What’s my risk of dying in the next 10 years?
Age is a life insurance carrier’s number one consideration. The reason for this isn’t a secret: The older you are, the more likely it’ll have to pay out your policy. In determining your rate, underwriters look at life expectancy data.
Let’s continue with our example of a 50-year-old policyholder. For the typical 50-year-old man, the risk of dying in the next 10 years is 7.35%. For the average woman, it’s 4.57%. To put this into context, a man who turns 65 today can expect to live until 84.3, while a woman is likely to live until 86.6. Keep in mind these are average numbers — around a quarter of 65-year-olds will reach their 90th birthday.
How likely am I to die in the next 10 years?
| Age | Man | Woman |
|---|---|---|
| 21 | 1.35% | 0.54% |
| 26 | 1.51% | 0.71% |
| 31 | 1.77% | 0.98% |
| 36 | 2.27% | 1.43% |
| 41 | 3.35% | 2.17% |
| 46 | 5.25% | 3.34% |
| 51 | 7.95% | 4.90% |
| 56 | 11.31% | 6.94% |
| 61 | 15.74% | 10.22% |
| 66 | 22.62% | 15.82% |
| 71 | 33.35% | 24.80% |
Bottom line
Typically, people purchase a 10-year policy with a specific purpose in mind, whether that’s to cover their mortgage and debts, secure a loan or plan for retirement. It’s great for short-term financial obligations and is budget-friendly enough to fit into most families’ financial planning.
Before signing off on a policy, compare life insurance policies to make sure your coverage will protect your family’s finances.
Frequently asked questions about 10-year life insurance policies
When should I opt for a term life policy?
There are two main reasons for choosing term life insurance. The first is to protect specific and temporary needs, such as paying off a loan, covering your kids’ college costs or replacing your income if you die before retirement.
All of these expenses have an end date, making term life an appropriate choice. The second reason for opting for term life is the price. It’s the cheapest type of life insurance on the market, and the premiums stay the same for the life of the policy.
Can an insurer cancel my term life policy if my health deteriorates?
No. A term life policy will stay in force as long as you continue to pay your premiums. And those premiums don’t change — even if the state of your health does. The only ways an insurer can terminate your personal policy is if you don’t make an overdue payment within the grace period, which is usually 31 days, or if it discovers you lied or submitted misleading information on your application.
How should I prepare for the medical exam?
The medical exam is a simple physical. The doctor will record your height, weight, blood pressure and pulse, and ask for a blood and urine sample.
For the best results, try to avoid caffeine, sugar, alcohol and over-the-counter drugs for 24 hours before the exam. On the day of, be sure to drink lots of water so you’ll be able to easily provide the urine sample.
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