Let’s find out if the most popular term life option work for you.
When talking about term life insurance, conversations tend to focus on things like coverage amount and needs. This makes sense as they’re important topics. But term length is just as important. As it turns out, most policyholders have a 20-year term life insurance policy. So what makes 20-years attractive for people looking for a policy? And is one right for you? If you’re still asking yourself “how much life insurance do I need?” this is an important factor to think about.
- What is term life insurance again?
- What is 20-year term life insurance and why is it popular?
- 20-year term life insurance cost
What is term life insurance again?
So recap: term life insurance is an insurance type that provides coverage for a specific period. This period of time is called a “term.” Term lengths can vary depending on the options provided by the company and what policyholders choose.
Some companies may offer coverage in term blocks of 10, 20, or 30 years. Others may offer them at smaller increments. Then there are some, like Wysh *wink wink, nudge nudge,* that offer a wider variety of term lengths. We offer periods that start at just 2 years and can renew all the way up to your 65th birthday. Okay, ad’s over (sort of).
What is 20-year term life insurance and why is it popular
Out of all of those options, 20-year term life insurance policies are by far the most popular. 41% of term life policyholders have a 20-year term period. That’s way more people than 30 or even 15 years. Now, a number of things could be happening here. On the one hand, a 20-year term could be a good amount of time to cover the policyholder’s needs.
For example, the average student borrower takes approx. 20 years to repay student loans. This makes sense, time-wise. You get a decent amount of time to cover all your bases. You can lock in those 20-year term life insurance rates and have some decent runway in covering your needs.
Most common policy lengths
We also think the Middle Option Bias might be at play here. The Middle Option Bias, or the Center Stage Effect, is what happens when a person is more biased towards the middle option in a series of choices. If given three options, more people are biased towards picking the second one. Likewise, if customers are presented with three options of 10, 20, or 30 year term life insurance policies, Middle Option Bias may push people into being more biased towards 20-year policies.
20-year term life insurance cost
Now how much is a 20-year term life insurance policy? That depends on what your needs are. It’s important to use the right tools to calculate the perfect amount of coverage. One such tool we cite is the DIME Method, which stands for Debts, Income, Mortgage, and Education. Looking at these areas can help you determine what costs you might want covered. Let’s say you have young children. A 20-year policy could keep them covered through college to when they’re probably a bit more financially involved.
Cost-wise, according to ValuePenguin, the average cost of a 20-year term life insurance policy is about $146/mo (that’s providing a death benefit of $500k). This is an estimate, not concrete, but it can give you an idea of what to expect.
Ultimately, whether its Middle Option Bias or the just term length you want, your policy should be reflective of your needs. More importantly, your policy should be able to grow as your needs do. Don’t just pick the “easy” option. If a 20-year term life insurance policy works best for you, then go for it.
At Wysh our policies are personalized to your needs and flexible to change with them. If you get a 20-year term life insurance policy now, but want to increase your coverage or renew your term later, you can do that. A lot can happen in 20 years. Face it with help from Wysh.