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The beauty of term life is that you can pick your length of term coverage. The length usually runs from 5 to 30 years with 10 years being more or less right in the middle. 5 year term only works for certain situations so 10 year really becomes the base length of coverage for more traditional life insurance needs. Let's look at 10 year term life insurance and if it's useful for your needs.
A quick refresher. Term life insurance is primarily used to replace lost income over a period of time. The length of term is half of the equation while the amount of protection is the other half. The length of term that choose is entirely dependent on your particular situation. As we discussed in the 5 year term life article, that is probably too short a period of time to cover traditional needs in case someone passes away. 10 years is approaching the sweet area. Let's see what situations work well with 10 years of term life.
If you are purchasing life insurance (either additional or for the first time) with middle age children...say age 12 and 14, then 10 years may be ideal. 10 years of term should take you out to the point that both children have graduated for college. Getting children through early adulthood is a common concern that drives people to shop for term life insurance. 10 years might not be adequate if you have a new family with very young children but might ideally address a mid-life family.
Cost has a big impact in people choosing 10 years of term life and age is a primary driver of term life insurance rates. Again, the length of term and amount of protect act like a see-saw. If you want to keep the monthly premium at a certain amount you can lower the term length to increase the amount of protection and vice versa. If the amount of coverage is more important, some people will reduce the length of term and 10 years is usually the lowest length of time they are willing to go. This isn't exactly a bad strategy...especially if your in your 40's or 50's and 10 years take you out almost to the Medicare.
10 year could also work if you are a good part through a family mortgage. If you have 10 years left, buying to 10 years of term addresses the ability to pay off the mortgage for your loved ones. For most families, the mortgage is the largest debt or monthly expense they face that is less flexible.
There are also some business uses for 10 year term. This length of term might be ideal with a new venture or business. Let's face it, if your company can make it past 10 years than you are doing significantly better than the average. The most critical time is the initial start-up period and 10 years provides a cushion to insure that the loss of a critical person (also called key employee life insurance) does not wreck the company. The benefit can be used to find a replacement or float the company's finances during such a tumultuous transition.
Keep in mind that if you choose 10 year term life and come to the end of the policy term, you would likely need to re-qualify based on health and the cost will be significantly higher at your older age. When you run your term life insurance instant quote, double-check 10 year versus the next step-up which is 15 years. Make sure there's enough difference in pricing not to go with 15 years at the desired amount of life insurance.
If you are looking for inexpensive life insurance may be the 10 year term life insurance policy would fit your need perfectly. This is life insurance in its simplest form. The policy contains a guaranteed death benefit from the outset and a guaranteed level premium. After the initial 10 years some life insurance companies allow you to renew the policy for an additional 10 years at an increased premium. This 10 year term policy provides you with ample insurance for small outlay over a fairly short period of time.
Policy Death Benefit
If you are the proud owner of a 10 year term life insurance policy. If you should die within 10 years of your ownership of this policy the full face amount is paid to your beneficiary, either in a lump sum or in the form of a monthly income. The monthly income may take one of several different income options. You may choose to take a life income with no certain period. After the beneficiary begins receiving the income if s/he should die suddenly that would be the end of the income. No one would get anything more from that 10 year life insurance policy. It does not matter if the income is paid only for one month. There are other options that would assure you, however, that would assure your beneficiaries more of a pay out.
You could choose to pay them a life income with a 10 or 20 year certain. This would guarantee that the income is paid for 10 or 20 years respectively. You could choose a fixed period option which would guarantee that the income is paid out for a fixed period, example 20 years or you could use the interest option, which would keep your principal in tact and pay only interest to beneficiaries for a specific period of years. At the end of this period the principal would be paid.
Term Insurance Conversion Privelege
Most term insurance policies have built in a conversion privelege. The 10 year term life insurance policy is no exception. This is because term insurance is temporary insurance and people usually have a permanent for life insurance. You can convert your policy usually to any permanent policy within a specific period of time. Some companies limit your conversion period to 8 years, whereas others may allow the policy owner the full 10 years.
Available Riders To Your Policy
There are certain riders that you can add to your 10 year term life insurance policy which would tremendously increase it's value to yourself and your beneficiaries. You may add the waiver of premium disability rider. If you should become disabled, anytime after 6 months of disability, the life insurance company will pay your premiums for you even if it is for the entire duration of the policy. Now, isn't that just great?
Another rider that you can add is the accidental death benefit rider. This is sometimes referred as the double indemnity rider. If you should die in an accident the life insurance company will pay double the death benefit to your beneficiaries.
Minimums And Maximums
There are certain minimum and maximum amounts of 10 year term life insurance that insurance companies will be prepared to issue on an applicants life. This may vary by age and medical history. Some companies may be prepared to issue between $20,000 and $1,000,000, others may start at 100,000 and go as high as $10,000,000 or $20,000,000.
Living Benefit Riders
The aids virus brought about a fairly new idea which many life insurance companies have adopted. Because of a tremendous need for additional cash terminally ill people may sell their policy to investors for a percentage of its value. As an alternative you can add a rider to your policy which would allow you to withdraw a portion of your death benefit during your lifetime. This is called a living benefit rider. It would serve to ease the pressure on the terminally ill and their families.
Spouse And Child Term Riders
Many insurance companies offer the opportunity for you to add a comparatively small term life insurance rider on the life of your spouse and children. These riders are usually 5 year term or 10 year term riders which work out to be less expensive than had the policies been bought separately.