What Is 20-Year Term Life Insurance? | 2024 Guide

A 20-year term life insurance policy is a contract between you and a life insurance provider that pays a tax-free death benefit to your beneficiaries when you die while the policy is in force. It features fixed annual or monthly premiums for 20 years, but if you outlive the policy, the death benefit and two decades of premiums are lost. Unlike other types of life insurance, term policies have no cash value component for investing.

Term insurance is popular and affordable life insurance for younger policyholders looking to cover a specific financial obligation, like a mortgage or college tuition.

To understand how term life insurance works, we’ve defined the major components of a policy. They are:

• Insured: This is the person whose life is covered. The death benefit gets paid if the insured dies during the policy term.
• Policyholder: This is the person who buys the policy and pays the premiums. The policyholder is usually the insured. However, it is possible to take out a policy on someone else with their consent.
• Beneficiaries: These are the people, organizations or charities who reap the policy benefits after the insured person dies. There can be multiple beneficiaries.
• Premiums: Regular payments made by the policyholder to keep the policy in effect. Term life insurance features level premiums, the same amount each month or year. Policyholders usually have the option to pay premiums once a month or once a year.
• Death benefit: The sum of money paid to beneficiaries upon the insured person’s death. Term policies have a guaranteed death benefit.
• Term: The term length refers to how long your life insurance coverage is in effect. A 10-year term will be cheaper than a 30-year term with the same benefit, but it will be more expensive than a 20-year term.

What happens after 20 year term life insurance?

After the 20-year level term ends, your coverage expires. By outliving your policy, both the death benefit and two decades of premiums are lost. Terms are available in different lengths, typically from 10 to 30 years, so it’s important to select one that you think will be sufficient for your financial needs.

Can You Extend a 20-Year Term Life Insurance Policy?

Once the 20-year term ends, you can let the policy expire if you no longer have a need for life insurance. However, you can extend a 20-year term life insurance policy under the right circumstances. You usually have three options:

• Renew your term policy: If you can renew coverage, you won’t get the rate you locked in at the start of your policy. Now that 20 years have passed, you’ll lose 20 years of life expectancy and pay a significantly higher rate. Your rate will increase each year you renew the policy.
• Convert to a permanent policy: Some insurance carriers offer an option to convert a term policy to a permanent life policy without taking a new medical exam. Conversion works well if you want to take advantage of the savings component of a permanent policy or if you’re worried you may face higher rates by taking a health exam.
• Purchase a new policy: If you’re not interested in permanent life insurance or if you like a policy from another carrier, you can simply purchase a different policy. You will have to take another medical exam unless you opt for a pricier no-exam life insurance policy.

The cost of a 20-year term policy depends on the policyholder and the amount of coverage needed. Purchasing a higher coverage amount or additional coverages, known as riders, increases the price.

Your age, gender and health directly affect premiums. As you age, your life expectancy shortens. That makes you riskier to insure. Additionally, men have a shorter life expectancy than women. Because of that, men pay slightly higher premiums than women. You’ll also have to take a medical exam or at least answer questions about your health to help the provider calculate your risk profile.

Insurance companies may also consider:

• Criminal background
• Driving record
• Financial history
• Height and weight
• Hobbies
• International travel
• Medical history of immediate family members
• Occupation
• Smoking and tobacco use

If you’re concerned about cost, request quotes from the top cheap life insurance companies.

Speak to a life insurance agent or financial advisor to weigh your options and find a policy that fits you. But here are several situations when 20-year life insurance might be a good fit.

You have financial dependents. If you have a partner and young children and your peak earning years are ahead of you, a 20-year term policy can ensure your loved ones have money if anything happens to you. You might select a death benefit that covers college tuition for your dependents or 10 years of your salary if you’re the primary earner.

You have specific financial responsibilities. Term life insurance is an affordable way to provide financial protection to your beneficiaries when you have outstanding financial obligations. You might consider a 20-year term period if you:

• Have student loans
• Have a hefty car loan
• Have a mortgage
• Are the breadwinner
• Have a young child

You want to supplement a permanent life policy.

You might have a whole life policy but want to boost the benefit for a shorter time, such as when you have any of the financial obligations listed above. You can add a term policy to your existing permanent life insurance.

If you’re unsure whether 20-year term life insurance is right for you, learn more about the differences between term and whole life insurance.

Yes, 20-year term life insurance is an affordable and simple policy that offers fixed premiums and a guaranteed death benefit for the 20 years the policy is in force. It can provide peace of mind that your loved ones will have financial protection in case anything happens to you during a period when your financial obligations are high.

But remember the payout and premiums are forfeited if you outlive the policy term. Make sure 20 years is the amount of time you want coverage.

There are many types of life insurance options that excel in different situations. If a 20-year term sounds like the right life insurance plan for you, it’s easy to get started by shopping online. We recommend gathering term life insurance quotes from at least three providers before buying a policy.