How Is A 20-Year Term Different From Other Plans?
A 20-year Term Life Insurance policy designs to provide life insurance coverage for 20 years. It is one of the most familiar term policies (10, 15, 20. 25, and 30-year terms).
The premium of a 20-year term policy remains the same throughout the contracted period, so the insurance provider cannot increase the premium for any reason. Moreover, the death benefit also remains the same.
One of the significant disadvantages of having a 20-year term life insurance is that there will not be coverage of death benefits for your beneficiaries once your policy has completed its term.
Is 20-Year Term Beneficial For You or Not?
The policyholders of a 20-year term policy are usually a young adult who has started a family and is seeking an affordable life insurance policy that can become an alternative to his/her income if they pass away unexpectedly.
A 20-year term policy can act as a solution in different situations other than an alternative or income.
The following are some relevant situation of an individual in need of a 20-year term policy; who
- Wants to provide a source to cease home for loved ones and have 20 years or less remaining on their mortgage.
- Has a considerable amount of debt that has to be paid in 20 years.
- Cannot bear the expense of permanent life insurance now but needs to have a backup of insurance coverage until he/she can bear it.
- Has to buy life insurance because of a divorce agreement.
Usually, individuals who buy 20-year term life insurance need a bridge of life insurance till retirement.
How Does A 20-Year Term Policy Function?
A 20-year term life insurance policy agrees with the policyholder to pay a death benefit to your beneficiary in exchange for a premium for 20 years.
The best thing about term life insurance is that the premium remains the same as long as you pay the premium on time and will not increase for any reason.
Term Life Insurance is much simpler and accessible than whole life or universal life insurance. The premium charged depends upon the average cost of insurance over 20 years and the policy fee.
Pros and Cons
Like other insurance plans, a 20-year term policy plan has some pros and cons.
As term life insurance is temporary, the mortality rate is much lower than permanent life insurance, which outcomes that the insurer is paying out fewer claims. As your premium depends upon the cost of life insurance and the policy fee, the premium of term life insurance is much affordable than permanent life insurance.
- Premium’s Cost Remain Same
Like whole life insurance, the death benefit and premium remain the same throughout the period, i.e., 20 years. Getting ill or getting older will not affect the cost of the monthly premium.
- Optional Insurance Riders
Insurance providers allow the policyholders to customize their insurance coverage by using optional insurance riders. These riders help the policyholder to widen his/her coverage. And, add a valuable thing in exchange for a nominal additional premium.
- High Renewal Charges
Although term life insurance is temporary insurance, your insurance provider will usually offer an annually-renewable term policy at renewal. However, the premium depends upon your age at which you are doing a renewal. And definitely, the premium will be considerably higher than your 20-year term policy.
Like permanent life insurance, once your 20-year policy began, you cannot alter the premium cost or other benefits to meet your unexpected life events. In this case, if you need more coverage, you will have to buy a separate policy.