What does 20 Year Term Life Insurance Mean?
A 20-year term policy, like most other term policies, has a level premium during the initial term, meaning the insurance company cannot raise your premium for any reason during the term. Additionally, the coverage amount (death benefit) remains level as well.
The disadvantage of having 20-year term life insurance is you might outlive it because once your policy has reached the end of it’s term, there will no longer be a death benefit for your beneficiaries
It’s important to note, however, that most insurance companies will offer a renewal of the policy but only for one year at a time and the new rate will be based on your age at renewal. And, many insurers will provide a conversion option that allows the policyholder to convert all or a portion of the term policy to a permanent policy without having to go through medical underwriting again.
Why Do People Choose a 20 Year Policy?
The typical customer who shops for a 20-year term policy is generally a young adult who is starting a family and is looking for an affordable life insurance policy that can replace his or her income if they die unexpectedly.
Other than income replacement, a 20-year term policy can also be an affordable solution for an applicant who:
- wants to provide a paid-off home for loved ones and have 20 years or less remaining on their mortgage
- has a significant amount of debt that will be paid off in 20 years
- cannot afford permanent life insurance now but needs to have insurance coverage until he or she can afford it
- is forced to purchase life insurance because of a divorce agreement
In general, individuals who purchase 20-year term life insurance simply need temporary life insurance coverage for 20 years or less.
How does a 20 Year Term Life Insurance Policy Work?
Simply put, a 20-year term life insurance policy is an insurance company’s promise to pay a death benefit to your beneficiary in exchange for a periodic premium for the duration of the 20-year period.
The guarantees that are provided with a 20-year term policy is that the death benefit is guaranteed for 20-years as long as you pay the premium and the premium cannot be increased by the insurance company, even if you become terminally ill.
Compared to permanent life insurance like whole life or universal life insurance, term life insurance is very straightforward. The premium charged is based on the cost of insurance averaged over 20 years and the policy fee.
There are no living benefits in a term life insurance policy unless added on by endorsement at the time of application and there is no cash-value component.
Pros and Cons of a 20-year Term Life Insurance Policy
As with any type of life insurance whether term or permanent, some pros and cons are generally based on an applicant’s reason for buying insurance in the first place.
Since term life insurance is temporary, the mortality rate is much lower than permanent life insurance which results in the insurer paying out fewer claims. And, since your premium is based on the cost of life insurance and the policy fee, premiums are more affordable than any other life insurance except accidental death insurance.
As was mentioned earlier, term life insurance is available in terms from 10 years to 30-years (and 35 and 40 years with a few companies), so it makes financial sense that the shorter your term is the less your premium will be.
Here’s an example:
William is a healthy 30-year-old healthy non- smoker and wants to compare the rates for each of the different policy terms for term life insurance.
Here’s what William can expect to pay for a $500,000 policy:
|10-Year Term||15-Year Term||20-Year Term||25-Year Term||30-Year Term|
Similar to whole life insurance, the death benefit and premium payments remain level in a 20-year term life insurance policy. Getting sick or getting older will never affect the amount you pay each month or the amount due to your beneficiary if you die during the policy term.
Competition among Companies
Since term life insurance is the most popular type of life insurance on the market today, the competition between companies has become fierce. Certainly, this competition benefits the consumers, and rates have never been lower than they are today.
Riders to Customize Your Coverage
Optional insurance riders allow for an applicant to customize their insurance coverage to meet their specific needs. These riders allow the policyholder to broaden his or her coverage and add valuable living benefits for a nominal additional premium each month.
The most popular term insurance riders are:
- Accelerated Death Benefit – This rider provides for the insurance company to advance a large portion of the death benefit if the insured is diagnosed with a covered terminal or chronic illness.
- Accidental Death Benefit – Allows the applicant to purchase accidental death insurance at inexpensive rates so the death benefit is increased if the insured dies as a result of an accident.
- Conversion Rider – The conversion rider allows the policyholder to convert all or some of the term insurance to permanent insurance without the need for medical underwriting.
- Return of Premium – The return of premium rider provides for the insurance company to return 100% of the premium paid if the policyholder outlives the insurance policy.
Disadvantages of 20-Year Term Life Insurance
Higher Premiums at Renewal
Although term life insurance is considered temporary, your insurance company will generally offer an annually-renewable term policy at renewal. The premium, however, will be based on your age at renewal and will be significantly higher than your 20-year term policy. Also, since the renewable is for only one year, your rates will continue to increase year after year.
Similar to whole life insurance, once your 20-year term policy is issued, you cannot change the premium amount or the death benefit to accommodate life events. If you find you need more coverage, you’ll have to purchase a separate policy and deal with the medical underwriting once again (unless you qualify for a no-exam policy).
Is a 20-Year Term Policy Right for Me?
No matter what type of insurance you’re looking for or which company you purchase it from, it will only be right for you if it meets your needs.
To help you understand if a 20-year term life insurance policy makes sense for you, consider the financial risks listed below and then ask yourself if 20-year term is the best solution:
If you’re still not certain if a 20-year term insurance policy will be the best solution for the risks you anticipate, speak with an experienced and reputable independent insurance agent who has years of experience helping prospective clients decide which term insurance policy will best meet your needs.
Using an independent agent for your insurance transaction will give you an advantage and help you navigate an industry that can be confusing and often frustrating.
Certainly, your cost of insurance will be a priority while you’re insurance shopping but it’s important to keep in mind that most consumers don’t realize they may have purchased the wrong life insurance product until it’s too late.
Canceling a policy that’s not responding to your needs and then purchasing another one can be more expensive every year that goes by. Your 20-year term life insurance policy will never be cheaper than it is today.
20 Year Term Life Insurance Cost
As was mentioned earlier in this article, the competition between insurance companies that offer term life insurance has become fierce over the last 10 years. Knowing this, it’s critical that you get insurance quotes from as many highly-rated companies as possible.
Fortunately for consumers, because of innovative technology shopping for term life insurance is easier today than ever before. Virtually every independent life insurance brokerage has an instant insurance quoter on their website.
These insurance quoters (comparative raters) allow insurance shoppers to get an insurance quote from every insurance company that a particular broker represents.
Since insurance shoppers want to get as many quotes as possible, it makes sense to do business with an independent agent that represents the majority of the highly-rated insurers that are serious about competing in the term life insurance marketplace
Here’s what a healthy male and female can expect to pay for a $500,000 20-Year Term Life Insurance policy:
|Age of Applicant||Male Non-Smoker||Female Non-Smoker|
Although the rates listed above are actual rates for the age groups mentioned, we recommend that you take advantage of our instant term quotes to get your 20-year term life insurance rates by age.
What if You Have a Pre-Existing Medical Condition?
Since all term life insurance products are rated based on age, health, face amount, and policy term, it’s important to understand that the most healthy applicants will pay less for term life insurance than those applicants with pre-existing medical conditions.
Even though many term life insurance companies offer no-medical-exam term life insurance, your health underwriting information will still be gathered using the Medical Information Bureau, Prescription Drug databases, and your answers to the health questions on the life insurance application.
It’s very important, however, that you answer the health questions truthfully because your life insurance company will have a 2-year contestability period when it can challenge any claim and investigate the answers you provided on the application.
Typically the worst pre-existing condition is not really a medical condition, but a lifestyle. Applicants who smoke cigarettes will be subject to at least a 50% rate increase over non-smokers. In fact, you’ll probably pay less for term life insurance if you have blood pressure issues than you would if you are a smoker.
Although certain medical issues will cause a denial of coverage, most insurers are aware of typical medical conditions that applicants are dealing with and will do their best to accommodate those medical issues.
Additionally, your underwriter will also look at your weight vs height and BMI which could affect your life insurance as much as a serious medical condition.
How to Get a Free 20 Year Term Life Insurance Quote
As we mentioned earlier, the best way to obtain free life insurance quotes from many of the highly-rated insurance companies is by contacting an independent insurance broker like LifeInsure.com.
You can start by offering minimal information to get a quote for your policy of choice and then one of our insurance professionals will follow up with you to for the information we’ll need to make certain you have a quote you can rely on.
LifeInsure.com agents enjoy speaking with prospective clients and doing everything possible to help find the best life insurance solution for your needs. We are not employed by any insurance company which allows us to put the needs of our clients and prospective clients first and foremost.
Take the first step by getting an instant quote using our world-class comparative rater:
When you find the quote that is right for you, simply complete the preliminary online application and then we’ll be in touch and take it from there.
Frequently Asked Questions
Question: Should I get a 20 or 30-year term life insurance policy?
Answer: The term you select should be sufficient to meet your family’s lifestyle and debt needs. For example, if you have recently purchased a 30-year mortgage, choose a 30-year term policy.
Question: Which companies provide the best 20-year term life insurance policy?
Answer: Typically our top-five 20-year term companies are Banner Life, Protective, AIG, Principal, and Lincoln Financial.
Question: What happens when term life insurance expires?
Answer: Unless your company offers a renewal that you accept, or you take advantage of the conversion option, when your policy expires you will no longer have coverage.
Question: How much is the average 20-year term life policy?
Answer: Your 20-year term insurance quote will be based primarily on your age, health, and face amount but we’ve found over time that the average 20-year term price for a 30- year-old healthy non-smoker is about $20 per month for a $500,000 policy.
Question: What is the best term life insurance policy for a 20-year-old?
Answer: The best term life insurance policy for a 20-year-old is a policy that is sufficient to cover your risk (financial needs) and is purchased from a highly-rated national insurance company.
CEO - Licensed Agent
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.