In this article, we tell you why a 20-year term life insurance policy is worth a look.
A 20 year term life insurance policy may be just what you need as part of your life insurance planning.
What is 20 Year Term Life Insurance?
20-year term life insurance definition – Life insurance that provides protection for the level term period of 20 years. Thereafter, when the level term period has expired, the life insurance continues at annual renewable term rates until age 95 with most policies.
Legal & General America (Banner Life) is a leader in the term life insurance market with 1.3 million customers (as of 2017). Banner has term periods from 10-40 years, “with 20 years being the most common term.”
We agree that the 20-year policy is by far the most commonly selected by our clients. Here’s why:
Pros and Cons of 20 Year Term Life
There are advantages and disadvantages to every type of life insurance policy, and 20-year term life insurance is no different.
The pros of a 20 year term life insurance policy include:
Your life insurance rate is locked in for 20 years! That’s a long time for you to build up savings, pay down mortgages, have your children grow up.
The rates for 20-year term life insurance are competitive and will save money when you compare to 25 through 40 year term lengths.
The cons of 20 year term life insurance include:
There aren’t many negatives to a
Is a 20-year term long enough to meet all your needs?
Here’s an example – A 40-year-old male, preferred plus health can get a $1 million 20-year term for $50 per month (see below rate chart).
The downside of that term policy is in year 21 when the monthly rate increases to $1,236 per month…ouch!
A new policy will be far less expensive if you still have good health.
Which leads us to, if you develop health issues, your options are going to be converting your term life to permanent life insurance (expensive) or shopping the
20 Year Term Life Insurance Rates
Preferred plus 20-year term life insurance rates
Sample preferred plus rates from AIG, Banner Life, Lincoln National, Protective Life, and others as of 03/2019, rounded up to the nearest dollar.
20 Year Term Insurance Conversion Options
All term life policies that we sell at RiskQuoter include a conversion privilege built into the policy.
In fact, while most term policies are never converted, it’s an important
Something to keep in mind is that conversion privileges vary by insurer.
A conversion privilege allows you to exchange your term life insurance policy for a whole life or universal life insurance policy without having to go through life insurance underwriting again.
In other words, the health rate class you received when you bought the term policy is the rate class you receive when you convert.
Why is a conversion privilege important to have?
The main reason is for people who develop significant health issues and become uninsurable during the level term period of their policy. Conversion allows you to exchange your policy for lifetime coverage.
20 Year Term Life Insurance vs. Whole Life Insurance
There’s really no comparison as these 2 types of life insurance completely different…so why bother comparing the two?
The problem with whole life insurance is not usually the product, it’s how whole life is sold by some agents.
Here’s the problem. Say you’re a 40-year-old male, preferred health and the life insurance
Go ahead, check out our life insurance needs article first to see how much you really need.
The agent proposes their company’s whole life policy. That $1,000,000 policy costs $14,800 per year!
As a result, the agent illustrates lesser face amounts of coverage until you get a $250,000 whole life policy for $3,900 per year.
And now you have two problems. You’re overpaying for life insurance and are now under-insured!
The idea of whole life insurance sounds great. The illustrations show tremendous cash value growth over the years to be used for college, retirement, etc. but understand that those values are not guaranteed and your beneficiary only gets the death benefit, not the cash value.
Having the right amount of life insurance should be the most important goal before looking at life insurance as some sort of investment.
Compare that whole life to a $1,000,000 20-year term life insurance policy. At preferred rates, you can get a policy for less than $765 per year!
The bottom line is that 20-year term life insurance provides you with a
With our life insurance service, there is never any pressure or obligation. We’ll provide you with the information you need to make an informed decision about your life insurance.