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How to Choose A Term Life Insurance Length

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Term life insurance is an affordable life insurance option that provides the flexibility to choose coverage for a period of time when you need it most.

Whereas permanent life insurance options such as universal life and whole life insurance are one long contract intended to last your entire life, term insurance plans only provide temporary coverage.

With term life insurance, your coverage is based on a term length. So, in addition to determining the right amount of coverage you need, you must also figure out how long of a term length you will need.

Term lengths are available in multiple options, from short contract periods to long contracts periods. Of course, the longer the term, the more you’ll pay, so you want to choose a contract length that makes sense for your situation without having to pay for years of coverage you don’t need.

This guide shares everything you need to know to choose the best term life insurance length based on your life insurance needs.

Basics of Term Life Insurance

Term life insurance is temporary coverage offered in various contract lengths. It is designed to provide pure death benefit protection. That means there is no cash value growth potential, as there is with most permanent life insurance plans.

Since there is no cash value growth opportunity and because coverage is temporary, term insurance is often the most affordable form of life insurance coverage available.

Because of the affordability and flexibility that term life insurance plans offer, they are easily one of the most popular life insurance options for young and older age groups. That is because of the large amounts of coverage you can get compared to the cost of any other type of life insurance, making it relatively easy to get the correct amount of coverage needed to protect your family.

When looking at the basics of how term life insurance works, the concept is pretty straightforward once your policy is active. But first, you need to choose a death benefit amount which will be the total amount of money paid to your beneficiary if you die while your policy is active.

Choosing a death benefit amount can be a little tricky. However, life insurance calculators can help you determine an amount of coverage based on responses to financial needs questions.

Another age-old method is the multiple of income option. This method involves taking your annual income and multiplying it by the number of years your spouse would need if you were to pass. Most financial experts such as Dave Ramsey recommend having a minimum of 10-12x your annual income when choosing a death benefit amount.

Second, you need to choose a term length to go along with your death benefit. Ideally, your term length should last as long as your life insurance needs remain persistent.

However, if you buying life insurance on a budget, beware that longer term lengths will result in higher rates. This is primarily because the insurance provider has a greater risk of paying on a potential death claim the longer the coverage remains active.

Most companies offer term lengths in five-year increments varying between 10-years through 30-years. A few providers will even offer term lengths of 1, 5, 35, or even 40-years, but these are not as common among most providers.

Once you have chosen a death benefit amount and term length and have qualified for a term life insurance policy, much is not required after the life insurance coverage has been placed in an active status.

Remember, term insurance is pretty straightforward. All term insurance plans offer a death benefit and premium rate that are consistent for the entire term length of the policy.

The policy will expire once the term is over, and at that point, you may decide you no longer need life insurance coverage, or you may start a new term life insurance policy.

How Many Term Life Insurance Lengths Are There?

As you can see, term life insurance involves coverage for a specified amount of time, or “term period.” There are different contract lengths you can choose from. The average number of term life insurance lengths offered by most providers is three consisting of:

  • 10-years
  • 20-years
  • 30 years

However, some companies may also offer term lengths of 5, 15, or 25 years or options for longer terms over 30 years. In some cases, you may be able to get a 1-year term known as an “annually renewable” or “yearly renewable” term.

As previously mentioned, regardless of the term length of the life insurance policy, your premium payments are guaranteed to remain the same price throughout the contract length.

The only key difference to note is that premiums will increase with a

n annual renewable term policy (ART) each new policy year you choose to renew coverage, but the death benefit will stay the same.

How Should you Choose a Term Life Insurance Length?

Of course, one of the most significant decisions you must make about a term life insurance policy is the length of the contract you choose.

Essentially, you want to pick a term length long enough that covers all of your financial obligations and outstanding debts so that those you leave behind will not face financial hardship in the event of your passing.

For example, suppose you choose a term length long enough to take care of all your family’s financial obligations. Then, a few years into the contract, you pass away from an unforeseen medical condition.

In that case, your beneficiaries are paid the full death benefit of the term policy, which will help them keep up with financial obligations to maintain the same standard of living.

On the other hand, let’s say you picked a shorter contract length to pay a lower price for your coverage. But, in this example, you had passed away shortly after the term length expired.

Because of changes in your health that had occurred before the term insurance policy ended, you were not eligible to renew coverage. In this case, your beneficiaries would not have received any death benefit since your term length expired and the policy terminated.

These are real-life scenarios that happen and should be kept in mind when choosing a term life insurance length.

Which term life insurance contract length is best?

There is not a single contract length that will be best for everyone. The best term life insurance length will be the one that lasts long enough to handle financial obligations until those financial obligations are no longer an obligation. That can be 10-years, 20-years, or even 30-years. There is no one correct answer that will be the same for everyone.

When determining how long your term life insurance policy should last, there are more than a few factors to consider. However, there are four that you should especially pay attention to, and they include:

  • Your age
  • Spouse
  • Children
  • Mortgage balance

When considering a term length, your age will play a part in which contract lengths will be available to you. All term insurance lengths have a minimum and maximum issue age. That means if you’re over the age limit on a particular term length, you will need to choose a lower contract length that meets your age requirements.

One of the common reasons families choose to purchase life insurance coverage, outside of having the funds to pay for funeral costs, is to replace lost income to their spouse should one of them pass away. Therefore, when choosing a term length, consider the number of working years you have left until retirement and potentially try to match it to a term length closest to that number.

There is no doubt about it; children are expensive. Therefore, if you are a new parent or currently have children, you’ll want to choose a term policy that will last long enough that your child or children would no longer be financially dependent on you. That likely means selecting a policy that has a 20 to 30-year contract length that would cover the cost of raising the child and factoring in college expenses if you were to pass away. 

One of the most popular types of life insurance sold is mortgage protection insurance. The thing is, mortgage protection insurance is really just term life insurance that has a death benefit and term length that is equal to the terms of your mortgage balance. That way, if you die, your spouse would be able to either pay off the mortgage balance or have the monthly funds needed to keep making mortgage payments.

As mentioned, several factors go into choosing a term length, but your age, spouse, children, and mortgage are often a great starting point.

Let’s review the most popular term contract lengths, and when choosing each may make the most sense.

10 Year Term Life Insurance Plan

  • 10-year term life insurance definition: Temporary life insurance coverage that offers a fixed premium that lasts for precisely 10 consecutive years. 

While a 10-year term plan may seem relatively short compared to 20 or 30 years, it can still offer a good safety net for many people. Here are some cases where you should consider a 10-year term length:

Cheapest cost. The 10-year term life insurance plan is the shortest contract length for all term insurance providers. Since it offers the shortest duration of coverage, the premiums are the cheapest compared to longer contract options. Therefore, if you are looking for the most affordable term life insurance length, the 10-year plan is where you should start.

Parents of older children. If your children are already teens, you may not need an extended amount of term coverage. In this case, a 10-year term may provide enough protection to where your children have become financially independent.

Close to retirement. Even if retirement is right around the corner, life insurance needs don’t stop. For example, a 10-year policy could cover outstanding debts that would be passed on to your surviving spouse.

Extended mortgage. If you moved or refinanced, you might end up with a mortgage longer than you expected. In that event, your original term life insurance policy may not last until your mortgage is paid off, and you might want to purchase a shorter-term (10-year) life insurance policy to help cover your debts.

Young and older applicants. Every term contract has a maximum age cutoff to where the coverage will not be available if you’re over the age limit. The 10-year term offers the most extensive age range allowing applicants up to age 80 to apply and receive a 10-year term insurance plan.

20 Year Term Life Insurance Plan

  • 20-year term life insurance definition: Temporary life insurance coverage that offers a fixed premium that lasts for precisely 20 consecutive years. 

A 20-year policy is one of the most popular choices. But, for people in their 30s, a 20-year policy is often just enough to cover your kids into adulthood and account for the rest of your mortgage.

By choosing a 20-year policy, you can save a bit of money compared to a 30-year policy as long as this contract length works well for your situation. Here’s who typically benefits from a 20-year term length: 

Parents of young children. Depending on their situation, parents of young children can benefit from a 20-year or 30-year term length. The 30-year term is better for those who are risk-averse and want a big of wiggle room (like to help kids through college and onto their feet as young adults). However, the age of your kids matters. A 20-year term could be a better fit if your children are already 5+. 

Those with cosigned debts. The term length you choose should cover any debts you would leave behind, especially cosigned debts. Cover all of the bases when evaluating your debt horizon. 

Cost-conscious buyers. If cost is a primary factor for you, a 20-year term may be best. 30-year term policies are affordable, but they still cost more than a 20-year contract. A 20-year term still offers pretty good coverage for most life insurance buyers and can also be a bit easier on the wallet. 

20 years from retirement. If you’re only 20 years or less from retirement, a 20-year term length should provide enough coverage until that milestone. After retirement, life insurance may not be as important for your family.

30 Year Term Life Insurance Plan

  • 30-year term life insurance definition: Temporary life insurance coverage that offers a fixed premium that lasts for precisely 30 consecutive years. 

While a 30-year term length will cost more than a shorter-term period, you should not avoid it if it’s the term length that best suits your needs.

With a 30-year term, your loved ones are more likely to get the coverage they need for an extended period. Additionally, you’ll be able to lock in your premium at a younger age and pay the same rate instead of facing higher rates as you get older. The top candidates for a 30-year term length are:

New homeowners. The majority of mortgages are 30-year fixed-rate mortgages. If you’ve recently bought a home with a 30-year mortgage, then you should opt for a 30-year life insurance contract length.

Housing expenses are the largest portion of our living expenses, so you want to make sure your family can pay for the mortgage if you pass away. 

New parents or parents of special needs children. If you recently had a child, you’ll need to consider how your death could impact your family financially. A 30-year contract for your term life insurance ensures that the family you leave behind would be able to support your children through college.

If you have a special needs child, a 30-year term length is optimal, regardless of how old your child is now, because many special needs children need lifelong care. 

Newlyweds. Newlyweds often join their finances or take on new debts (like a mortgage) together. 30-year life insurance policies offer solid financial protection and will last many newlyweds until they are near retirement. 

Primary earners. If you are responsible for most of the income in your family, then you’ll want a term length that could get your spouse to retirement.

What is the Longest Available Term Life Insurance Length?

Typically, the longest term that most life insurance companies will offer is 30-years. For most people, a 30-year policy is enough to cover all financial obligations and ensure their spouse and children would be financially secure.

However, a few life insurance companies have begun to offer longer contract lengths, like 35 and 40-year terms. If you are looking for a term length that is longer than 30 years, we recommend reading the following:

Can You Have Multiple Term Contract Lengths?

No rule prevents anyone from owning more than one term life insurance contract. Owning multiple term insurance contracts is a practical life insurance planning tool called laddering.

Laddering is when you own two or more separate life insurance policies that often have a different contract length, death benefit, or both.

People ladder policies mainly because they are either planning for future changes with their life insurance needs or have experienced a change with their life insurance needs since purchasing a policy.

For example, let’s say you have three needs for life insurance coverage: providing a replacement on income to your spouse, expenses such as college costs for your children, and mortgage.

You could purchase one 30-year term life insurance policy to cover these life insurance needs but then you are stuck into a 30-year policy and a death benefit that you might not need later in life. You could also purchase multiple policies laddering the death benefit to end certain policies when specific life insurance needs end.

To properly ladder your life insurance coverage, you could purchase one term length that is long enough to provide your spouse a replacement of income during your working years, another policy to cover the time needed for childcare and higher education costs, and a third policy that would last as long as the loan of your mortgage.

The idea behind the laddering term lengths is that as life insurance needs fall off, so does your life insurance and premiums.

Will I Outlive My Term Insurance Contract?

There’s no way to predict if someone will outlive their life insurance coverage. However, statistically speaking, most people who purchase term life insurance will likely outlive their term length.

Term insurance is not permanent coverage. Instead, these plans are designed to handle temporary life insurance needs providing a financial safety net should the unthinkable happen during a time when financial protection is at its highest.

As life insurance needs become lesser as you grow older, most people opt to choose a smaller whole life insurance policy such as final expense, which can provide permanent protection.

Term insurance lengths are also capped at a maximum age to where you will not be eligible to apply for a policy if you’re over the allowable age limit. Currently, most life insurance providers have limited the maximum age for a 10-year term length policy to age 80, providing coverage to age 90.

Options After Your Term Length Ends

Since most people do outlive their term policy, many life insurance buyers wonder, “what happens after the term length ends?”

When your term life insurance term, your fixed premium ends. You can choose not to buy any more life insurance at that time, which will make sense for some, especially if you’re retired, your children are grown, and your debts (like a mortgage) are paid off.

If you decide you still need more coverage, most term insurance contracts allow continued payments under the same plan. This is known as an annually renewable plan that lasts up to a certain age (typically 90).

However, choosing to continue coverage on an expired term plan will result in premiums that will be much higher than what you were initially paying. Premiums will also increase each year you choose to renew the coverage. Therefore, you generally only want to continue paying on an expired term contract if you still need coverage and cannot re-qualify for an entirely new term length.

You may also convert your term plan into whole life insurance. When you convert term life insurance, you will not have to provide evidence of insurability, and premiums will become fixed for the rest of your life. Conversions are another great policy feature but keep in mind they too can be expensive as you will be exchanging term coverage for permanent coverage.

Another option is to purchase a new term life insurance plan. You can evaluate your current needs and apply for a new term policy. This is often the most cost-effective option if you still need coverage, but your new rates will likely be higher than your first policy because you will be older at that time. You will also need to prove your eligibility for coverage by going through new underwriting.

Do You Get Your Money Back When the Term Length Ends?

You’ve paid your premiums for all the years of your term life insurance, and now the term is over. Do you get your money back when the term contract ends?

Unfortunately, in most cases, no. Term insurance does not have any cash value growth. You can think of it almost like “renting” insurance. Once your “lease” is up, you still do not own anything from it.

However, there is a particular type of term life insurance called a return of premium term insurance policy that would allow you to get your money back. Generally, these policies are becoming less common, with only a few companies offering them in 2022.

Return of premium term insurance plans is typically only offered in term lengths of either 20 or 30 years. They also cost much more than regular term life insurance policies as the insurance company does not profit much from the coverage. It is one of the main reasons most term insurance providers have stopped offering the coverage option.

The vast majority of the time, you cannot get your money back from a term life insurance policy. But remember, you were not just throwing money away. Instead, you’re providing financial security for your family and ensuring they would not fall into financial hardship if you were to pass away.

Other Types of Term Life Insurance Contracts

Most traditional term life insurance contracts are based around a set amount of years. The death benefit and premiums are also locked in for the entire term duration.

However, some plans, known as “decreasing term contracts,” have a death benefit that decreases throughout the contract length.

Decreasing term insurance plans were popular with mortgage protection insurance. The term insurance plans would work by choosing a term length that matched the length and balance of your mortgage loan. As you paid down your mortgage, the policy’s death benefit would decrease.

Most of today’s term insurance providers do not offer decreasing term plans. Instead, they have mostly been phased out, with the traditional term level insurance being the primary choice for term life insurance.

What’s the Most Commonly Purchased Term Length?

The 10, 20, and 30-year term lengths are most commonly purchased. A 10-year plan is an enticing option for anyone looking for an affordable life insurance plan based on price alone. However, that does not mean it’s always the right option for you.

When choosing the term length of your life insurance, you want a plan that will cover your financial obligations, including your debts and your children.

While paying for a plan that is much longer than you need will cost you extra, choosing too short of a plan could be disastrous. In general, you want to err on the side of getting a couple of years of extra coverage rather than several years less than the coverage you need.

Here’s why:

  • If you pass away after your term, your beneficiaries receive no benefit. 
  • If you decide you still need coverage after your term, you will pay more for the new policy instead of paying the rate you locked in at a younger age. 
  • Health changes could prevent you from getting new coverage. 

Can You Cancel a Term Insurance Contract?

Before entering a contract of any type, you want to make sure you understand your obligations to the insurance company and the insurance company’s obligation to you.

With most term life insurance plans, the contract is relatively simple. After you have been approved for a plan, your responsibility is to make your required premium payments for the life insurance coverage when due.

In return, the life insurance company promises that if you die when the term insurance contract is active, the company will pay out the full value (death benefit) of the life insurance coverage to the beneficiaries named on the policy.

When it comes to canceling a term insurance contract, you are not obligated to keep paying if you decide you no longer need coverage.

You’re able to cancel your term life insurance without fees at any time. This makes it a very safe option, allowing you to have coverage without locking you into a contract you cannot get out of.

Remember, term insurance does not have a cash-value account, so you will only receive a refund of unused premiums. So, for example, if you pay annually for your coverage and cancel six months after making your annual payment, the insurance company will only refund the six months of remaining premium.

Does Permanent Life Insurance Have Contract Lengths?

Unlike term life insurance, permanent life insurance does not have contract lengths. Permanent or whole life insurance is supposed to last your entire lifetime (up to age 121), which is why it is so much more expensive. Therefore, it often makes more sense financially to choose a term life insurance policy that meets your financial needs.

Shop Term Life Insurance Contract Lengths

Now that you know the basics about term life insurance and contract lengths, it’s time to find a policy that meets your needs. You can shop term life insurance contracts without leaving your home or getting a medical exam. Head over to our quote page to shop term life insurance quotes and contracts today.

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Picture of Jeffrey Manola - Life Insurance Expert
Jeffrey Manola - Life Insurance Expert

Jeffrey Manola is the founder of No Medical Exam Quotes, an online insurance agency that strongly focuses on helping people shop for the perfect life insurance policy. He is a licensed life insurance expert and content creator for the website.

Before becoming a life insurance agent, he served in the United States Marine Corps, transitioning from serving his country to helping families find affordable life insurance coverage beginning in 2009. Since starting a career as a licensed life insurance agent, Jeffrey has helped thousands of families with their life insurance needs.

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