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Ask Dave

Why Term Life Insurance For Only 20 Years?

Dave explains the purpose of 20-year term life insurance.

QUESTION: A listener asks why Dave recommends 20-year term life. What should you do after you stop the term life insurance?

ANSWER: Let’s say you’re 32 years old and you have two young children. In 20 years you’ll be 52, and the kids will be in their mid-twenties. Twenty years from now you should also be much more financially stable – debt-free and building wealth.

That means by 52 your kids will be out of the house, you’ll be debt-free, and you’ll have a little more than $500,000 in mutual funds. If you die and do not have life insurance your spouse can live on the savings and investments you built up. That’s what it means to be self-insured and that’s what happens when you don’t get caught up in cash value or whole life insurance. As you become more financially secure you have less need for insurance.

The only perpetual need for life insurance is an agent’s need for commission. You don’t have a lifetime need for insurance if you plan wisely, dump debt, and build wealth.