As a general rule, 30-year term life insurance is one of the most flexible policies you can buy, because it comes very close to the benefits of a whole life policy, but at a fraction of the premium cost.
It’s more expensive than other term policies, like 10 year and 20-year plans, but the term is long enough to can easily accommodate an extended period of major insurance need in the typical person’s lifespan.
You can also add specific policy riders that will either give you extra protection or provide valuable options when the policy term comes to an end.
What is a 30 Year Term Life Insurance Policy?
Even though it covers nearly half a human lifetime, a 30-year term life insurance policy is still a term policy.
Unlike shorter-term policies, like a 5-year or 10-year, or 20-year term policy, you don’t have to worry about a policy premium adjustment every few years. And for what it’s worth, the premium adjustments on shorter-term policies will increase steadily, due to the fact that you’ll be older at the time of renewal.
The core advantage of a 30-year term life insurance policy is that it provides you with a level amount of coverage for a fixed premium for a full three decades.
If you like the idea of term insurance, but you’re concerned about term expirations, a 30-year policy is an excellent choice.
As term policies go, the 30 year comes the closest to whole life insurance, based on the fact that it runs for such a long time. But one major area where it departs from whole life is that it doesn’t offer an investment provision. Once the term ends, there’ll be no cash value.
This is an example of how term insurance is pure life insurance, rather than life insurance combined with an investment provision.
The Benefits of a 30 Year Term Life Insurance Policy
The major benefit of a 30-year term life insurance policy is the length of the term. It’s the longest running term life insurance policy available.
That’s no small advantage by itself. In 30 years, you can raise your children, send them to college, pay off your mortgage, and get out of debt.
It even affords you enough time to build up a large enough amount of savings and investments that you’ll become virtually self-insured.
For example, let’s say you’re 25 years old and you have $10,000 in savings. But because you’re starting a family and you purchased a house, you take a 30-year term policy for $300,000.
By the end of 30 years, you may have accumulated $300,000 or more in savings and investments. At that point, your need for life insurance coverage will diminish. You can then opt for a smaller, less expensive policy as a replacement.
A 30-year policy can also cover a very specific need. For example, it naturally matches up well with a 30-year mortgage.
You can maintain the policy until the mortgage is paid off, at which point it will become unnecessary.
But should you die before the loan is paid off, the policy will take care of the mortgage for you. And since the death benefit on the policy remains constant, while the amount of the mortgage declines over time, extra funds will be available for your loved ones.
The Downsides of a 30-year Term Life Insurance Policy
A 30-year term policy also has a major cost advantage over whole life insurance. Because it has a specific term and no investment provision, it will be much less expensive than whole life. In fact, the monthly premium may be only a fraction of the cost of a whole life policy.
However, a 30-year policy will be more expensive on an annual basis than a term policy of a shorter duration, like 10-year term life insurance.
This is because the extended length of the term makes it more likely the insurance company will have to pay a death benefit on the policy.
But even so, the cost of a single 30-year policy is likely to be less than a 10-year policy, which will need to be renewed at progressively higher premium rates each time it expires.
The level nature of the premium on the 30-year policy can make it less expensive in the long run.
Who is a 30 Year Term Life Insurance Policy Best for?
The 30-year term life insurance policy will work best for those who have a long-term need for life insurance, but either lack the financial resources or the willingness to pay the much higher cost of a whole life policy.
While it’s true that whole life is permanent life insurance, a 30-year term policy will generally be long enough to cover the periods of major expense in the average person’s life.
Once that period has passed, the policy owner can choose to either renew the existing policy – which will probably be offered in shorter time frames, like one year or five years – or reduce the amount of the death benefit to keep the premiums affordable.
The fact that the premiums on a 30-year term policy are so much lower than on a whole life policy has a couple of major financial benefits.
First, since it costs so much less than whole life, you can purchase a larger policy. While you may only be able to afford a $100,000 whole life policy, the lower premium on a 30-year term might enable you to get a policy for $500,000. That may be more in line with your actual life insurance needs.
But you can also choose to go with a more modest death benefit, in favor of reducing the premiums. If you do, the money you save on the premiums can be invested, helping you to reach the point where you won’t need as much life insurance in the future.
And once again, a 30-year term makes that much more achievable than shorter-term policies can.
If you do choose to go with the 30-year term policy (“buy term and invest the difference”), just make sure you do invest the difference. If you don’t, the benefit of this strategy will be lost.
What to Consider When Buying a 30 Year Term
Life insurance policies can come with a lot of bells and whistles, but the most basic consideration is that you get adequate coverage, at a premium you can afford.
As mentioned earlier, the monthly premium on a 30-year term policy will be higher than what it will be for plans with shorter terms. But it does have the advantage of providing a fixed payment for the entire 30 years.
If you can comfortably afford the premiums on a 30-year policy now, you may be able to add additional life insurance coverage as your income increases over the years.
As is the case with virtually all insurance policies, you can add a variety of riders to customize your policy.
For example, if you have an idea you might want to make your policy permanent, you can add a rider to convert your term policy to a permanent, whole life policy. It will increase the premium, but it will give you the option to make the conversion without having to undergo a medical evaluation.
Another rider well worth considering is a return of premium rider. Since one of the major disadvantages of a 30-year term life policy compared to whole life is the lack of an investment provision, this rider offers an opportunity to at least recover your premiums.
Once again, you’ll pay a higher premium for this option, but at the end of the 30-year term, the insurance company will refund the premiums you’ve paid for the entire term.
The cash payout won’t be quite as generous as that a whole life policy, but it will effectively result in free life insurance for the entire 30 years of the term.
You can discuss these and other policy options with your life insurance broker.
Final Thoughts on 30 Year Term Policies
Since whole life insurance is admittedly cost prohibitive – especially for young families – a 30-year term life insurance policy is usually the next best option. It will provide you with coverage for the longest term, at a very reasonable premium.
Since there are several different term life options, as well as riders to customize your policy, it’s best to discuss your options with an independent life insurance agent.
That’s someone who works with many different insurance companies, and will offer you the opportunity to get the most coverage, with the best options, at the lowest premium.
I am an independent life insurance broker, and I work with dozens of insurance companies. But I don’t work for the insurance companies – I’ll be working for you.
Give me a call or complete the “Instant Quote” screen to the right of this article and put my experience to work for you!