Do You Need 30 Years of Term Life Insurance? Here's What Dave Ramsey Says

If you have people in your life you support financially, then it's really important that you put a life insurance policy in place. And when it comes to buying life insurance, you have choices.

You could get whole life insurance, which accumulates a cash value and covers you for the rest of your life. But whole life insurance can be prohibitively expensive. And if you get whole life insurance, you might struggle to cover the cost of your premiums. Fall behind on those payments, and it could result in your coverage lapsing.

That's why term life insurance is generally a better bet. It can be far less expensive than whole life insurance, so you're less likely to fall behind on your premium payments and risk losing your coverage. 

Now, the nice thing about term life insurance is that you can pick the length of coverage you want. Most life insurance companies that offer term life will write you a 30-year policy (though this may not be the case if you're older when you apply). 

But does someone actually need 30 years of coverage? For the most part, financial guru Dave Ramsey thinks not.

A shorter term could easily suffice

The purpose of term life insurance is to make sure your loved ones are protected. So the length of the term you lock in should hinge on who it is you're protecting. 

Let's say you're in your 30s with two children. Your primary goal in getting life insurance may be to ensure that your children's costs are covered until they reach adulthood and can start working. In that case, you may be fine to put a 20-year term life policy in place. 

In fact, Ramsey says that when it comes to life insurance, "For most people, a term of 15 or 20 years does the job." This isn't to say that buying coverage for a longer period of time is a terrible idea. Rather, you might end up paying for coverage you don't actually end up needing.

The longer your term life insurance policy is set up to last, the more it's going to cost you. That's because your life insurance company is at a higher risk of needing to pay out a benefit on your policy if it lasts for three decades versus one and a half decades or two. 

Run the numbers when making your life insurance choice

Depending on your age and the state of your health when you apply for life insurance, you may find that the difference in cost between a 20-year term life insurance policy and a 30-year term life insurance policy isn't so significant. You may decide to just buy the lengthier policy and get extra peace of mind.

But if you're looking at a more substantial difference in cost, consider whether you truly need a full 30 years of life insurance coverage. You may come to realize that a shorter term gives your loved ones the protection they need without you having to worry about paying for those extra years.