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For young and healthy people in their 20s, 30s and 40s, a 20-year policy is the most popular term. It offers protection and peace of mind for a formative time of your life, and it’s an inexpensive, reliable option. While a lot can change in 20 years, your premium stays the same and will see you through major life changes, such as marriage, kids, college and buying a home.
How much is a 20-year term life insurance policy?
As with all life insurance, the rate you’re offered is based on a range of factors, such as your age, health, lifestyle, medical history and occupation. With term life, the premiums stay the same for the life of the policy, which is why it’s a good idea to lock in a good rate early on. That way, even if your health changes over the course of 20 years, you won’t be charged more.
Let’s look at the typical cost of a $250,000, 20-year term life insurance policy. According to our research, the monthly cost for a 30-year-old nonsmoking man living in Los Angeles, California might be between $13.12 and $33.64, or . For a smoker, the rate tends to start at $39.77 and go up to $78.62.
For a 30-year-old nonsmoking woman, it might set her back between $11.71 and $30.28 a month. If she smokes, the rate could climb to somewhere between $32.03 and $62.65.
Sample monthly rates for a $250,000, 20-year term life coverage for a healthy nonsmoker
Sample monthly rates for a $250,000 20-year term life coverage for a smoker
*Sample rates provided by Quotacy and are valid as of August 2019.
Do I need a 20-year life insurance policy?
A 20-year policy is the most popular type of term insurance, especially for the young and healthy. Ideally, you should take out a policy that matches your longest financial obligation — such as a mortgage or putting your kids through school.
With that in mind, these are some common reasons to purchase this policy:
- Protect your income. Do you have dependents relying on your income? A 20-year policy can protect your family and give them the money they need to cover their living expenses if you die prematurely.
- Pay off debt. If you do the math and figure out you have 20 years left before you’re debt free, consider taking out a 20-year policy. That way, your family won’t be burdened with those repayments if you pass away.
- Cover your kids’ college costs. Most parents purchase a policy that covers their kids through college, when they start working and earning money themselves. If you’re a young parent, you could take out a 20-year policy that expires around the time your kids graduate.
- Plan for retirement. If you’re around 20 years away from retiring, a 20-year policy could secure your retirement income should anything happen to you. At this stage of your life, you’re probably working your way up the career ladder and building your wealth.
- Secure a loan. If you’re hoping to take out a personal or business loan, you can secure it with a life insurance policy. This reassures lenders that you have every intention to pay back the money, even if you die.
Who shouldn’t get a 20-year term life insurance policy?
That depends on your situation. To calculate your needs, think about why you’re purchasing life insurance.
Is it to simply cover your end-of-life expenses and pay off your debt? Or do you want to give your family a sense of financial security for the future, and maybe leave your kids or grandkids an inheritance? Your needs will be different if you’re still working.
If your needs are temporary, term life insurance will probably still be the best option for you. Here are some scenarios where a 20-year term life insurance policy isn’t the best fit.
- You’re close to retirement. Most people choose a term length that takes them up until their retirement. That way, they have the time and income to pay off their debts while building up a comfortable nest egg. If you’re retiring within the next few years, consider a 5-year term policy.
- You plan to pay off your debt in the next 20 years. If you’ve been steadily chipping away at your debts and predict you’ll have paid them off in less than 20 years, consider a shorter policy, like a 10-year term. This helps you to avoid the common mistake of buying too much coverage, and for too long.
- You have more or less time left on your mortgage. If you have more than 20 years left on your mortgage, it’s a good idea to look at something like 25- or 30-year coverage. Your life insurance policy should ideally cover your mortgage so your family isn’t saddled with the financial burden if you die. Alternatively, if you only have 10 years left on your mortgage and no other major debts or responsibilities, consider a 10-year term instead.
What happens after the 20-year term is up?
Your coverage expires with your policy. At that point, you have several options:
- Renew the policy. Apply for another term life policy soon before it expires, or before you turn 70. The renewal rate will be much higher than your previous premium as it’s based on your age and health when you applied. You’ll most likely have to take another medical exam and answer those same questions you did 20 years ago. If you’re still relatively healthy, you may be able to requalify at a reasonable rate.
- Convert the policy. If your term policy has a conversion feature, you can opt to upgrade to a permanent policy, such as whole life or universal life. With most providers, you can convert without providing evidence of your insurability, like undergoing another medical exam. Permanent policies are more expensive, but they offer lifelong protection and are ideal for people who want to treat their life insurance as an investment.
- Let the policy lapse. If you no longer want or need life insurance coverage, you can simply let your term life policy end.
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What’s my risk of dying in the next 20 years?
The reason term life insurance rates are on the cheaper side is because people are living longer. Life expectancy plays a huge part in an underwriter’s calculations.
According to our life expectancy data, for a typical 40-year-old man, the risk of dying in the next 20 years is 10.20%. For the average woman, it’s 6.46%.
To put this into context, it helps to analyze these figures next to the average life expectancy in the US. A man who reaches his 65th birthday can expect to live until 84.3, while a woman is likely to live until 86. Of course, these are averages — around a quarter of 65-year-olds will live past 90.
How likely am I to die in the next 30 years?
20-year term policies are the most popular — especially for those in their 20s, 30s and 40s. It makes sense. This kind of coverage offers protection and peace of mind during a period of major life changes, like marriage, children and buying a home, all while giving you the time to pay off your debt and build up your wealth while you’re still working.
Life insurance is personalized. To make sure you’re buying the coverage that suits you best, explore our guide to life insurance.
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