Which Term Is Right?

Tammy asks if she should get a 10-year term life insurance policy or a 20-year policy. Dave advises getting a 20-year policy unless you’re older.

QUESTION: Tammy on Facebook asks if she should get a 10-year term life insurance policy or a 20-year policy. Dave advises getting a 20-year policy unless you’re older.

ANSWER: The only time I’d get a 10-year policy is if you’re really old and you’re just getting it for a few years. I usually recommend 15- to 20-year level term insurance, and the idea behind that is this: When will you be out of debt including the house, when will the kids be grown and gone, and when will you have a big enough pile of cash that it won’t financially hurt you if he dies?

If you have two children, ages 6 and 12, then in 15 years, they will both be gone or very close and a 15-year term would probably be good. If you are on my plan, you will also have paid off your 15-year mortgage by then and will have been saving 15% of your income, so that will be a good pile of money. If all that happens and he dies with no life insurance, you are financially fine.

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