What is 10 year term life insurance?
10 year term life insurance is a type of short-term or limited-term life insurance policy that is now available on the Australian market through select providers. As the name indicates, 10 year term life insurance provides death and terminal illness cover for a select period of 10 years, which would cease once the policy expires or if there is a lapse in premium payments. If you die or are diagnosed with a terminal illness while the policy is still active, a lump benefit is payable to your nominated beneficiary/ies.
A 10 year term life insurance policy offers similar benefits to guaranteed renewable term life plans that are widely available on the market; however, you may find that the policy features and benefits on offer are not as comprehensive as the latter.
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Contents of this guide
- Different Term Options Available for Purchase in Australia
- 10 Year Term Life Insurance: Who is it Suitable for?
- How Much does 10 Year Term Life Insurance Cost?
- Can I Obtain a 10 Year Life Insurance Cover with No Medical Exam?
Different Term Options Available for Purchase in Australia
Other than the 10 year term, you can also select cover periods of 5, 15, 20 to 30 years, or generally to age 99 if you opt for cover with guaranteed renewal. It is important to carefully assess your needs and situation when determining the appropriate life insurance term to provide cover for you and your family. Depending on the life stage you are in, you may consider a shorter or longer period of cover.
10 Year Term Life Insurance: Who is it Suitable for?
10 year term life insurance policy may be suitable for individuals who are looking for a short-term cover option to provide financial protection for their family during a critical period. It may also be suitable for people at a later stage of their lives with financial dependents that require assistance in meeting any ongoing commitments should the main breadwinner is no longer around to care for them.
How Much does 10 Year Term Life Insurance Cost?
Compared to long-term policies of 20, 30 year, or with guaranteed renewable feature, 10 year term life insurance policies are more affordable. This is primarily due to a shorter period of coverage and simplified benefit structure of the policy. However, just like any other life insurance application, your premiums will be determined by the following factors:
- Age: The older you are, the higher your premiums will be due to increased health related risks.
- Gender: Men generally pays more in premiums than women as men are more prone to certain health conditions.
- Occupation: If you work within a high-risk environment, your premiums will generally be more expensive compared to those who work in low-risk occupations, such as office workers.
- Pre-existing medical condition: If you have a pre-existing health condition, additional loadings may be applied to your premium rates.
- Lifestyle habits: Smokers will generally pay double in premiums Your alcohol consumption and your Body Mass Index (BMI) are other factors that life insurance providers will consider too.
- Hobbies and pastimes: The activities that you do outside of work matter if they are considered to pose a degree of risk to your general wellbeing, such as skydiving, or parasailing.
Can I Obtain a 10 Year Life Insurance Cover with No Medical Exam?
Most insurance providers will generally require you to undertake a medical exam at the time of application. However, in some cases, a medical check up may not be necessary if you are perceived to present no significant risk to the insurer - that is if you don’t smoke, have moderate alcohol consumption level, and are generally in good health, with no pre-existing medical conditions.
If you have a pre-existing health condition, don’t worry. An insurance provider will not refuse your application just for that reason. A medical exam is often necessary to provide the insurer an accurate depiction of your health, so they are able to tailor your policy to match your specific needs and at appropriate premium rates.
Benefits of a 10 Year Term Life Insurance Plan
- Life cover for people in their 50s: You could be looking for limited term of cover for a number of reason, but primarily it is because you want to make sure that there is a form of protection in place while your financial commitments are most significant. If you are in your 50s with children that are yet to complete their education, you want to make sure that they are financially protected should anything happens to you at this time.
- Budget restraints: If you have a limited budget, you may want to consider a 10 year term life insurance policy as it is more affordable compared to longer term and guaranteed renewable policies. Be aware though, you will have to take out a new policy if you still require protection at the end of the policy.
How is a 10 Year Term Life Insurance Different to a 20 Year Policy?
Although a 10 year term life policy is cheaper compared to a 20 year plan, the latter can generally provide more comprehensive coverage with access to additional features and benefits that you can tailor to your specific needs. You also have the option to increase your cover amount at significant life events as your financial obligations may have changed, such as when you get married, have a baby or taking out a mortgage.
20 year term life insurance can also help to anticipate additional protection needs that you may have in the future, as oppose to having to purchase a new policy as is the case of a 10 year policy.
10 Year Term vs 20 Year Term Life Insurance: Which One Should I Buy?
It is important to carefully consider the most appropriate term for your life insurance policy, as it differs between one individual to another. Some of the important factors to consider include:
- Your age at the time of application: Your life insurance needs will be different depending on the stage of life you are in. If you are in your 30s, you may to consider a longer term to anticipate future events and additional financial obligations that may incur in the future, such as a mortgage or having a child. However, if you’re in your 50s, you may already have paid most of your mortgage, but your children have yet to finish university or find a job. At this time, you may be considering short term cover or a reduced sum-insured.
- Your current financial situation: While 10 year term life insurance is cheaper, you run the risk of having to purchase a new policy at higher premium rates because of your age. When you apply for 20 year term life insurance when you are still young, you can take advantage of cheaper premiums and maintain sufficient cover during critical periods.
- Long-term debts: Making sure that you are sufficiently covered when your financial commitments are the highest is crucial, especially if you have a young family.
A 10 year term life insurance policy can provide an affordable solution to applicants who are looking to secure short-term cover in the later stages of their life. However, if you are in your 20s or 30s, it may be wise to consider long-term or guaranteed renewable term life cover as it can provide you with sufficient cover at times you will most need protection.