Everything You Need to Know About 10-Year Term Life Insurance Policies

10-Year Life Insurance Policies

10-year life insurance is a type of term policy and it can be a great option for people in various situations. If you need to pay off a mortgage, put your kids through college, or plan for retirement within the next 10 years, a 10-year term policy is an efficient, affordable tool to keep you covered during that time. Alternatively, if you plan to convert your short-term policy to a permanent one, 10-year life insurance can also serve your needs.

People often choose 10-year life insurance not in spite of it being a short-term policy, but exactly because it’s a relatively short-term policy. Like other types of life insurance, the purpose of a 10-year term is to make sure that those who are close to you won’t get saddled with a financial burden if you die early. But the specific length of 10-year term life insurance makes it a smart financial and personal choice in certain situations.

In this article, we’ll discuss how 10-year term life insurance works, how much you can expect to pay for a policy, and why it’s the ideal choice for many people.

What is Term Life Insurance?

Term life insurance is a type of life insurance policy that lasts for a specific number of years, or term. It’s also known as “pure” life insurance because its sole purpose is to provide a death benefit to your beneficiaries. It’s simple, straightforward, with no bells and whistles.

Permanent life insurance, on the other hand, offers a death benefit plus an investment component. For this reason, it’s more complicated and also more expensive than term (you can read more about the differences between term & whole life insurance here).

With term life insurance, you pay a premium every month, the amount of which is determined by several factors (discussed below). Your beneficiaries are then entitled to a death benefit payout should you die within that period of time. The death benefit is usually paid out tax-free and can be used by the beneficiaries however they see fit.

If the term ends and you haven’t died (which is the best-case scenario!), you don’t get a refund of premiums (meaning you’ll get nothing in return for the premiums you’ve paid during your term). Just consider it money well-spent on peace of mind.

When the term ends, your insurer is likely to give you several options: continue your policy at a higher rising cost, convert it to a whole policy, or let it expire. Once expired, you will no longer have life insurance coverage in place.

Term life insurance policies are typically sold in increments of 5 years. Most insurance carriers start with a minimum term policy of 10 years and go up to 30, though a handful also offers 1-year, 5-year, or 40-year term policies.

Term Life InsuranceWhole Life Insurance
Mainly sold in policies of 10, 20, and 30 yearsPolicies have no expiration date
Pure life insuranceInclude a cash value component that can be used to pay monthly premiums, invest, or borrowed against
Popular due to affordabilityCan range from 5-15 times more expensive than term policies of the same coverage

What is a 10-Year Term Life Insurance Policy?

10-year term life insurance is a policy that lasts for 10 years. As long as you pay your monthly premiums, the policy is valid for the entire term.

Traditional 10-year term policies require a life insurance medical exam as part of the application process, in addition to a lengthy questionnaire that includes questions about your health, driving records, finances, hobbies, and more. Whether you apply for 10-year term life insurance, 20-year, or 30-year, the application process is the same.

In addition to traditional 10-year term policies, there are also no exam options available. Generally, policies that require an exam cost less than those that don’t, but no exam policies are more convenient. You can read more about no exam life insurance here.

Since traditional 10-year policies are fairly common in the insurance world, most insurance carriers offer them. This works in your favor since you’ll have plenty of options and will be able to shop around for the best rates.

Advantages of a 10-Year Term Policy

A 10-year policy may seem like a short amount of time in the long run, but there are several advantages to purchasing a policy of this length. Like all types of life insurance, 10-year policies are purchased for the purpose of protecting loved ones from taking on too much of a financial burden. But because of the short length, there are specific scenarios in which a 10-year term policy makes the most sense.

Why Purchase a 10-Year Term Life Insurance Policy infographics

Here are some of the advantages of a 10-year term life insurance policy:

  • It’s affordable
  • It can help you secure a loan
  • Can cover mortgage payments
  • Protect retirement plans
  • Help with college tuition, weddings, and other expenses on big life events

Let’s look at each of these advantages in depth.

10-Year Term Life Insurance is Affordable

Overall, term life insurance policies cost significantly less than permanent life insurance policies. This is because term life insurance is “pure” and has an end date, whereas permanent life insurance includes an investment component and administrative fees. It also has no expiration date and is valid for the policyholder’s entire lifetime.

While each type of policy has its advantages and disadvantages, there’s no question that term life insurance is the more affordable option.

10-year life insurance, in particular, is more affordable than 20-year or 30-year policies because that’s the nature of life insurance — the shorter the term, the more affordable the policy. This makes it an ideal choice for a young individual or couple who wants life insurance but can’t afford to pay more for a longer-term length given their current income.

Since renewal options are available at the end of the term, a 10-year policy can offer coverage at a time in your life when you want to protect your loved ones but can’t afford to pay a lot for coverage. This makes it a popular choice for college students with debt and for young parents.

Can Help Secure a Loan

Some people need life insurance to qualify for a loan. Certain small business (SBA) loans require life insurance as a prerequisite for qualifying, as do many non-SBA lenders.

In this case, the beneficiary of your policy may not be a direct family member — it may be a business partner. There are several life insurance options for small business owners and entrepreneurs, so it’s best to consult with an insurance or business advisor to decide which life insurance policy is best for your situation.

If securing a loan is your primary reason for getting life insurance, you don’t need a long policy, you just need a policy that will outlast your loan.

Cover Mortgage Payments

Similar to the SBA loan, if you have a mortgage that is 10 years or less, a 10-year term policy will cover you for that time period. The policy ensures that, if you die and your outstanding mortgage payments get passed to your loved ones, they will have the funds to cover it.

Protect Retirement Plans

If you’re approaching retirement age and don’t have life insurance, a 10-year policy can protect your spouse or loved ones and cover any debt if you die before you reach that age. Since 10-year life insurance is very affordable, it’s a good option to bridge the gap until you reach retirement age.

Help with College Tuition, Weddings, and Other Big Life Events

10-year life insurance is a good option for parents who want to make sure they have money to pay for their youngest child’s college education or wedding. If your youngest is 12 and you want to make sure they’ll have enough money to pay for college if you die early, a 10-year policy is sufficient to meet this goal.

Weddings may be harder to plan for, but if you anticipate that your child will be getting married within the next 10 years, a 10-year policy will ensure that there is money to pay for the wedding even if you die early.

Is a 10-Year Term Length Better Than a 20- or 30-Year Term Length?

When it comes to the term length of your life insurance policy, there’s no “better” or “worse,” since life insurance is a highly individualized purchase. What’s good for your sibling, friend, neighbor, or even spouse will not necessarily be good for you. So you don’t need to look at it in terms of black and white, but rather, which term length will best suit your personal and financial situation.

That being said, we can offer some advice to help you arrive at the best decision.

Outline your goals. Why do you want to buy life insurance? Once you narrow down the “why,” the length of your term will be much easier to decide. If the answer to “why” falls into any of the categories described above — you need a short-term loan, want to pay for your child’s college tuition or wedding, or cover your loved ones until retirement — a 10-year policy will suit your needs.

If, however, you have a 25-year mortgage or other long-term loan and want to protect your loved ones from taking on this debt should you die before it’s paid off, 10-year life insurance will be too short. If you want to leave a nest egg to your loved ones at whatever age you pass, 10-year life insurance will not necessarily be enough. If you want to buy life insurance when young and not have to worry about renewing or converting your policy down the road, you will probably want a longer-term than 10 years.

In short, once you assess why you want (or need) life insurance, it will be much easier to decide upon the type of policy and term length that’s right for you (and you can read more about 20 or 30-year term life insurance policies here).

How Much Does a 10-Year Term Life Insurance Policy Cost?

There are many different factors that go into calculating the amount you will need to pay in monthly premiums, which means that the exact cost of a 10-year term life insurance policy differs from person to person. You can easily get an instant quote online, and we’ve provided the table below to give you an idea of sample rates.

Below is a list of sample rates for a $250,000 10-year term life insurance policy for a person of average health.

AgeMale Non-SmokerMale SmokerFemale Non-SmokerFemale Smoker
20$10.53$32.50$9.86$24.96
30$10.53$33.14$9.86$26.90
40$13.17$47.79$12.07$41.97
50$25.72$111.95$21.54$87.19
60$65.77$263.11$48.09$181.41

There are several things to note about these sample rates. First, notice that there is almost no difference between 20- and 30-year-old male and female non-smokers, while the difference between smokers in those age groups is negligible. However, between ages 40 and 50 and 50 and 60 for both non-smokers and smokers, the premiums climb significantly. This is why we recommend buying life insurance at a young age.

Another thing you may notice is that the female rates are lower than the male rates for all ages. This is because statistically, women live longer than men, and mortality predictions are directly correlated to life insurance premiums.

While women get lower rates than men across the board, smokers get higher rates than non-smokers across the board. The reason for the huge difference in smoker/non-smoker rates is that smokers have a higher mortality rate. According to the CDC, smokers die 10 years earlier than non-smokers. Insurers mitigate their risk by hiking up the monthly premiums.

At the ages of 50 and 60, the price difference between smokers and non-smokers is really significant. For males at age 50, the price from non-smoker to smoker jumps from about $25 to $111, while at age 60, the price jumps from $65 to $263! While the quotes for female smokers of the same ages don’t get as high, female smokers are still looking at a $50-$120 difference — and that’s per month.

What Factors Affect the Cost of 10-Year Term Life Insurance?

Underwriting is a complicated business and it involves taking many factors into account to determine an individual’s insurability and the cost of their monthly life insurance premiums. The main thing underwriters look for is a mortality prediction. Will the applicant die early (and the insurer then needs to pay out the death benefit) or will he outlive the policy (so the insurer does not need to pay out)?

To arrive at a mortality prediction, insurance underwriters take the following factors into account:

  • Age
  • Gender
  • Smoking status
  • Location
  • Weight & Height
  • Health history/family health history
  • Current health (based on life insurance medical exam)
  • Medication records
  • Job/hobbies
  • Driving records
  • Coverage amount
  • Term length

The higher the chances of an applicant dying early, the lower their chances of qualifying for life insurance. If, however, the applicant has a few health issues but nothing major, they can still qualify but get higher rates. The general rule of thumb is that the healthier you are, the lower your insurance rates will be. The unhealthier you are, the higher your rates will be.

This is why we encourage people to buy life insurance at a young age. Usually, the older you get, the more health issues you develop. The younger you are, the fewer health issues you have.

Additionally, even if you don’t develop health issues as you age, you will still be charged more in monthly premiums based on age alone. A 26-year-old will be charged more than a 25-year-old, and a 25-year-old will be charged more than a 24-year-old, etc. This is just the way it works.

Due to the criteria of health and age, purchasing a 10-year policy when you’re young makes sense for many people. By purchasing young, you can lock in a low rate for 10 years. When the policy ends, you have the option to renew. Of course, if you’re older and have outstanding debt, want to cover your child’s college tuition, or cover yourself until you reach retirement age, a 10-year policy can also be a good option.

Get an instant online quote for life insurance.