And does the popular option work best for you? Let’s discuss.
When talking about term life insurance, conversations typically focus on coverage amount and individual needs. Which makes sense, those are important topics. But term length is just as important to consider. Longer term lengths aren’t always better. Most term policyholders, however, have 20 year term life insurance policies. Why is that? And is a 20-year term life insurance right for you?
The Wyshbox Blog
- What is term life insurance again?
- Why are 20-year terms so popular?
- Do you need a 20-year term life insurance policy?
What is term life insurance again?
Term life insurance is a life insurance type that provides coverage for a specific period. This period of time is called a “term.” How long can those terms be? It depends on what you choose from your life insurance company.
Some life insurance companies may offer coverage in blocks of 10, 20, or 30 years. Others, such as Wyshbox *wink wink, nudge nudge,* can 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 (kind of).
But out of the smattering of options, 20-year term life policies are by far the most popular. Why would that be? Well, we have some guesses.
Most common term length policy periods
Why are 20-year terms so popular?
As it turns out, 41% of term life policyholders have a 20-year term period. Way more people have 20 years 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 for policyholders’ needs. For example, the average student borrower takes approx. 20 years to repay their loans.
This makes sense, time-wise. You get a decent amount of time to cover all your bases. And you can even lock in your premium rates with 20-year level term life insurance policies. This makes them very handy for young, healthy people who are just looking to provide protection for their families without the hassle of permanent coverage. What kind of things can you cover in that time?
We like to cite the DIME method to calculate coverage. You look at your debts, income, mortgage, and education to see what you need covered. Let’s say you have young children. One thing to think about is their future educational costs. A 20-year policy would keep them covered up through college.
We also want to point out that the Middle Option Bias may come into play. The Middle Option Bias or the Center Stage Effect is what happens when a person is more biased toward the middle option of a series of choices. So if you’re given a choice between three options, more people are biased towards picking the second one. If customers are presented with three options of 10, 20, or 30-year term lengths, Middle Option Bias may kick in. The customer may select 20 years, even if they don’t really need to simply because it “looks right.” It’s not as short as 10 but seems more manageable than 30.
Do you need a 20-year term life insurance policy?
20-year term life insurance rates aren’t magically better than any other options. Again, it comes down to your needs. And the needs of your loved ones. How much is a 20-year term life insurance policy? According to ValuePenguin, the average monthly cost is approx. $147/mo (with a $500k death benefit). But that’s an estimate, not a suggestion.
So whether it’s the Middle Option Bias or not, your term life policy should be reflective of your needs. You don’t want to get too much or too little coverage. And you don’t want to pick the “easiest” option. You should get a policy and term length that’ll work best for you and your loved ones. If that policy is for a period of 20 years, then that’s great. If you require coverage for less, that works too.
If you’re thinking of applying for a term life policy, check out our Wysh Builder! There you can build your Wyshes and create a personalized term life insurance policy just for you. Keep it as simple as paying off your mortgage or be as wild as to have your ashes thrown into space.