Perfect for covering major financial obligations, such as a mortgage or college costs.
A term life insurance policy puts a price on peace of mind that your beneficiaries are covered if something happens to you. Since this kind of coverage is usually available in 10-, 15-, 20- or 30-year terms, settle on a timeframe that suits you.
For many people, that’s a 15-year term. It’s budget friendly, and your premium doesn’t change during the life of the policy — even if your circumstances do. Generally, the best term length for you covers your biggest financial obligation, whether that’s a mortgage, car loan or your kids’ college costs, or the time between now and your retirement.
In other words, if you have 15 years’ worth of financial responsibilities or loved ones relying on your income, this term policy might be the right fit for you.
Life insurance companies that offer a 15-year term policy
What is the typical cost of a 15-year term life insurance policy?
Every life insurance policy is tailored to you and your lifestyle. When determining your rates, underwriters consider your age, health, lifestyle, medical history and occupation. The younger and healthier you are, the cheaper your rate will be — simply because you’re less of a risk for the insurer.
With a term life policy, the premiums stay the same for the life of the policy — in this case, 15 years. Even if your circumstances change or your health deteriorates during that time, it won’t affect the amount you pay every month.
Let’s use a $250,000, 15-year term life insurance policy as an example. For a 30-year-old nonsmoking man living in Los Angeles, California, our research shows the cost could be between $10.51 and $32.16 a month. If he smokes, the rate might jump to between $33.11 and $62.56 a month. A 30-year-old nonsmoking woman could pay between $9.89 and $24.72 a month. For a smoker, the same policy could set her back between $27.30 and $49.57 a month.
Now, let’s increase the policyholder’s age to 50. A nonsmoking man might be charged between $32.25 and $94.72 a month, while smokers see a price hike of $121.17 and $250.16 a month.
Thanks to a higher life expectancy, women tend to pay a little less for life insurance. A 50-year-old nonsmoking woman might pay between $23.87 and $73.50 a month. Her smoking counterpart could be charged between $96.23 and $170.51 a month.
When you sign off on a term life insurance policy, the coverage is set. However, if you realize you need more coverage, you can ladder policies by purchasing an additional one.
What is my risk of dying in the next 15 years?
When underwriting policies, life insurance providers look at life expectancy data. People are now living longer, which is why term life insurance is the cheapest option.
For the average 55-year-old man, the risk of dying in the next 15 years is 18.54%. For the typical woman, the number stands at 11.88%.
To put this into context, a man who reaches his 65th birthday is likely to live until 84.3, while a woman can expect to live until 86.6. Remember, these are averages; around a quarter of 65-year-olds will hit age 90.
How much life insurance do you need?
Answer three questions to see the coverage we recommend.
1) How much debt do you owe?
Include mortgages, credit cards, car loans, student loans and other debt.
2) How much do your loved ones need each month?
Start with how much you take home monthly, adding rent, food and necessities.
3) How many months will your loved ones need the income?
Indicate how long you think your loved ones need before they can sustain themselves in your absence
Your recommended coverage:
$50,000Typically you'll want to add another $15,000-$20,000 for final expenses such as medical costs and funeral expenses.
Who should buy a 15-year policy?
The best time to get life insurance is as soon as you need it, which is usually when you have debt or dependents relying on your income. As for length, buy a term that covers your longest financial obligation.
To figure that out, ask yourself these questions:
- Do you have children? Most people purchase a policy that takes their children through college and into adulthood. So, if your kids are 10 and 12 years old, a 15-year policy will provide protection until they’re 25 and 27. At that stage, they’ve probably graduated from college and are climbing the career ladder, so you may not need as much coverage. On the flipside, if your children are much younger, you might want to look at a longer term length.
- Do you have debt? For temporary financial needs, like a mortgage, term life insurance is a good option. If you’re taking out a 15-year mortgage on your home, or have 15 years left on your loan, it’s worth considering a 15-year term policy. This gives you the opportunity to pay down your debt while you’re alive, and gives you the peace of mind knowing that your family won’t be responsible for those payments if you die. The same principle applies to other debts, like student and car loans. You’ll want a term length that’ll pay off those debts.
- Are you approaching retirement? Many people purchase a policy that takes them up until their retirement, so 15-year policies are popular among those in their late 40s and early 50s. Usually, the last 15 years prior to retirement are crucial earning and saving years. You’re probably well established in your career, earning a solid salary and funnelling money into your 401(k) to prepare for your own retirement. You’ve likely paid off a good chunk of your debts and seen your kids through college. In these cases, a term life policy should be enough to replace your income. If you die during the term, your policy kicks in to offer your loved ones a source of income.
While you’re relatively young and healthy, the price difference between 10 and 15 years of protection and adding 50% more coverage to your policy can be as little as a few dollars a month. Many people see the value and affordability in more coverage and opt for the extra five years. This means their beneficiaries receive a higher death benefit if they die, for a small investment on their part.
What happens if my policy expires?
If your term policy expires, that’s a positive thing: It means you’re alive and kicking. There are a few options available to you:
- Renew the policy. If you’re younger than 70, you can apply for another term life policy before it expires. Your rate will be higher to reflect your age and health, and you’ll likely take another medical exam. The reasoning behind this is simple: You’re older now, so there’s a higher risk of your life insurance company paying out a death benefit. If you’re in good health, you may qualify for the amount of coverage you want at a reasonable rate.
- Convert the policy. Still need coverage? Most term policies come with a conversion feature allowing you to switch to a permanent whole life or universal life policy. Typically, you can convert without another medical exam or bloodwork. Permanent policies are much more expensive, but they offer lifelong protection and peace of mind. They also have an investment portion, making them a popular option for policyholders who want to boost the role of life insurance in their financial and estate planning.
- Let the policy lapse. If you decide you no longer want or need life insurance after 15 years of coverage, you don’t have to do anything. Just allow your policy to end.
Should I choose a longer or shorter policy?
To crunch the numbers, think about your longest or most expensive financial obligation. Maybe it’s your kids and their college costs. Maybe it’s your mortgage. Or maybe you want to offer your family a source of income if you die before retirement.
The length of your policy should cover your heftiest financial responsibility or take you up until your retirement. That way, if you die unexpectedly, your grieving family won’t be saddled with your debts and have the income they need to live comfortably.
One case where you might need a shorter policy
If you’re a careful saver who’s paid off most, if not all, of your debts, you can probably choose a shorter term life policy for the simple purpose of income replacement.
One case where you might need a longer policy
If your children are very young and won’t be working adults in 15 years you may want to go with a longer policy. Ideally, your term life insurance policy should cover your kids through college and possibly the start of their career.
Once a term life policy is set, it can’t be changed. Rather than purchasing a policy that covers your entire life, it’s worth looking at a 15-year term. For many people, this timeframe covers their major financial obligations, such as a mortgage, and offers their family a sense of financial security and a source of income if they pass away.
No one can predict the future, but if you believe you have 15 years of financial responsibilities and loved ones relying on you, this length of coverage may suit you.
To make an informed decision, check out our guide to life insurance.