Having these choices is a large part of the reason that term life insurance is so popular but ,of course, the super-low rates have a lot to do with its popularity as well.
However, with many insurance shoppers, having a lot of choices is not always a good thing if it leads to confusion or uncertainty. To avoid this, we are presenting this brief tutorial on 10-year term life insurance to help you become more informed and determine if a 10 Year Term Life Insurance policy is best for your circumstances and your budget.
What is a 10 Year Term Life Insurance Policy?
A 10-year term life insurance policy provides a guaranteed amount of life insurance for 10 years, during which time the premium remains level.
As long as the policyholder pays the premiums, the insurer cannot increase the premium for any reason and cannot reduce or cancel the insurance policy.
Since the insurance company is only at risk for 10 years of paying a death benefit, the cost of 10 year term insurance costs less than a 15, 20, 25, or 30-year term policy.
How Does 10-Year Term Life Insurance Work?
A 10-year term insurance policy is very straightforward and has only a few moving parts. The policy (insurance contract) is simply a promise to pay a death benefit if the insured dies within the 10-year policy term in exchange for a premium.
The death benefit is paid to the designated beneficiary or beneficiaries in a lump-sum payment that is typically tax-free.
Since term life insurance doesn’t build cash value or earn interest, policy loans are not available and the policy cannot be surrendered for any return of premium or cash value.
When a policyholder reaches the end of the policy term, there are four options to consider.
- Renew the policy at a higher rate (renewals are generally on an annual basis).
- Convert all or some of the coverage to permanent insurance.
- Cancel the policy and purchase a new policy.
- Do nothing and allow the policy to lapse.
Why Would You Buy a 10 Year Term Life Insurance Policy?
Since life insurance is purchased to cover a financial need, people who buy 10-year term life insurance are generally looking to cover a temporary financial risk or looking to use the policy as a bridge to another type of policy in the future.
For example, Thomas was recently married and is planning to start a family. He knows he needs life insurance and prefers to purchase permanent insurance to take advantage of the cash value component.
Thomas is not comfortable with the premiums for whole life or universal life insurance and feels like he would be in a better financial position in five or ten years.
Thomas’ agent recommends that he purchase a low-cost 10-year term policy now while he is very healthy, and then convert the policy to a permanent policy before the end of the term. By using the conversion privilege, Thomas will not have to worry about going through medical underwriting again and some companies will offer a conversion credit to reduce the premium of the new policy.
What other financial risks will a 10-year term policy accommodate?
- Cover a mortgage with 10 or fewer years remaining to pay – If your home mortgage has 10 or fewer years remaining, a 10-year term policy is an excellent way to have it paid in full if you died unexpectedly during the term of the policy.
- Create a coverage bridge until retirement – Most people do not plan to carry a lot of debt with them into retirement. If you are within 5 or 10 years of retirement, a 10-year term policy can affordably cover your debt until you reach retirement and do not need as much life insurance as you do now.
- Smokers who are planning to quit – If you are a smoker and planning to quit, permanent life insurance premiums will likely be out of reach until at least a year after you’ve quit smoking. A 10-year term policy is a more affordable alternative to get you there. Once you’ve gone a year without smoking, buying life insurance will cost half as much as it would as a smoker.
- Cover a major debt you’ve taken on – We all like to buy expensive toys and a lot of us prefer to finance them for up to 10 years. A 10-year term life insurance policy is the perfect strategy for covering the debt of an expensive boat or RV.
- College Planning – If you have kids that will be entering college in 10 years or soon, a 10-year term policy can be used to make certain the funds are available to them if you were to die unexpectedly before your college plan has been paid for.
Benefits of 10-Year Term Life Insurance
Depending on your circumstances and budget, 10-year term life insurance can provide many benefits other than being the cheapest tool in the toolbox.
As an independent insurance brokerage who has sold thousands of term life insurance policies over the years, we have found that the primary benefits consumers find in a 10-year term life insurance policy are its affordability, flexibility, and reliability.
Since term life insurance is such a competitive niche in the life insurance industry, 10-year term policies cheaper now than ever before. They are an absolutely affordable strategy for mitigating a financial risk of almost any size.
Although term insurance is considered straight life insurance, most companies offer optional riders that allow an applicant to broaden their coverage and add living benefits to their policy.
Term life insurance is reliable. Once your policy is issued, your insurance company cannot raise your premiums or cancel your policy because you’ve gotten older, have become ill, or even moved into a hospice facility. Making your scheduled premiums guarantees that your insurance company will keep its promise to pay if you die during the policy period.
How Much Does a 10-Year Term Life Insurance Policy Cost?
Like other life insurance products, your cost for term insurance will depend on your age at application, your current health and health history, the amount of coverage you need, and the policy term you select.
Here are the actual monthly rates for a $500,000 10-Year Term Policy for a healthy male and female non-smoker:
Age of Applicant Male Non-Smoker Female Non-Smoker
25 $13.75 $11.22
30 $14.10 $11.65
35 $14.25 $11.96
40 $18.37 $15.72
45 $27.62 $24.30
50 $42.44 $35.87
55 $68.49 $49.71
60 $110.46 $77.00
To find accurate quotes for your actual age, please use our instant quote form on the right (at the bottom on mobile). All quotes are subject to underwriting approval.
Is a 10-Year Term Length Better than a 20 or 30-Year Length?
The term length that will work best for you should always be based on your particular needs, circumstances, and budget.
The amount of insurance you need is not the determining factor when selecting the best policy term but, rather the amount of time you need to cover your financial risk.
Frequently Asked Questions
Question: Why is a 10-year term life insurance policy so much cheaper than a 30-year term policy?
Answer: Since insurance rates are based on mortality risk, the insurance company is less likely to have to pay a death claim for a 10-year policy than a 30-year policy. Thus the rates are lower for 10-year term than 20 or 30-year term.
Question: What are the most popular riders that people add to a 10-year term policy?
Answer: The three most popular riders for a 10-year term policy are:
- Accelerated Death Benefit – This rider allows the insured to use a portion of the death benefit in advance if diagnosed with certain critical or chronic illnesses.
- Accidental Death Benefit – this is an inexpensive rider that allows the insured to increase the death benefit if death is the result of an accident.
- Waiver of Premium – the waiver of premium rider provides for the insurer to waive premium payments while an insured is disabled and cannot work.
Question: Do I have to take a medical exam to buy a 10-year term life insurance policy?
Answer: The medical exam requirement varies by the insurance company and depends on the size of the policy you wish to purchase. There are many companies today who will offer no medical exam term life insurance if the face amount is $1 million or less.
Get a 10 Year Term Life Insurance Policy
Now that you know what a 10-year term policy is, and how it works, and why it might make sense for you, take advantage of our instant quote form for a free and confidential quote with no obligation to buy. If you need more information, call LifeInsure.com at 866-868-0099 during normal business hours or contact us through our website.
In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. Being independent, I represent many highly-rated insurance companies and, because I am not beholden to any one insurance company, my focus is to find the right company and policy for each individual client. I believe that when people shop for insurance (or anything else, for that matter) on the Internet, they are looking for a simple, non-intrusive, non-pressure method of doing so. I strive to treat my prospective clients with the utmost respect and I believe an educated prospect can make the right decision without sales pressure. Please feel free to contact me at your convenience.