Term Life Insurance: Determining the Best Length
When buying term life insurance, the length of the policy term is an important decision. You need the policy to be effective for as long as the condition you it for exists, but you may not need that particular coverage at all after the term has expired. Term life insurance is available in many different lengths, commonly 10, 20 and 30 year periods, but you can also purchase much shorter policies if the situation demands it.
Look at why you are buying the term life policy. The reason that you need to consider the length of the policy is simple: the longer you pay for a policy, the more it will cost you in total. Paying for a 10 year term life policy to cover a 5 year car loan would mean that you paid twice as much for the coverage than you needed to, and that is money that could have been better invested in other uses. Look at the reason you are buying the policy, and how long that reason will be an issue. With that time frame in mind, you are ready to start comparing quotes.
Term life insurance is perfect for insuring long-term goals. Paying off the mortgage or auto loan is a common usage, and those two reasons both have vastly different time frames associated with them, the mortgage might be for 15, 20 or 30 years, but the auto loan will most likely be paid off in 5 years or less.
You might also want to look into decreasing term policies. That type of term life insurance has a decreasing payout value as time goes on, which makes it an excellent type of insurance to match up with things such as mortgage and loans where the amount you owe will be lower after a few years than it is today. You will still be covered throughout the duration of the loan, but the payout amount will decrease along with the amount owed.