Are you prepared for the unexpected twists and turns that life can throw your way? Well! When it comes to protecting the financial future of your loved ones, you are concerned about available options. 10 Pay Life Insurance is one of the essential tools offering you great relief and financial security for your family.
As you may get an idea from its name, 10 year pay life insurance requires the insured to pay the premium payments for ten years only. After 10 years, the policy remains in force for the rest of the life of the policyholder without even paying the premiums. This unique payment schedule of this insurance plan makes it an attractive and reliable option among insureds.
In this blog post, we will discuss the key features of a 10 pay life insurance policy. We will also explore some other aspects and help you to determine whether it’s the right option for you.
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What is 10 Pay Life Insurance?
10 pay life insurance is a type of whole life insurance (a form of permanent insurance) that provides a guaranteed death benefit and a cash value component. With this plan, the insured has to pay the premiums for 10 years only to get coverage.
Unlike traditional whole life insurance plans in which a policyholder has to pay premiums for the rest of his life, 10 pay insurance allows to pay for a shorter period. After the insured has made the required payments, the plan remains in effect for the rest of his life, until and unless he pays the premiums on time.
How does 10 Pay Life Insurance work?
The premiums for this life insurance plan are usually higher as compared to standard whole life insurance plans because the insured pays off his policy in a shorter time frame. Meanwhile, the premium payments are fixed and do not increase with time, unlike traditional life insurance plans.
It means if you opt for this plan, you can easily budget for the premiums, certainly knowing that they won’t increase in the future. Moreover, coverage begins right away after getting the policy.
Usually, whole life policies including 10 pay whole life insurance have a cash value component that grows with time. The policyholders are allowed to take a loan or borrow against cash value once enough value has been built up. With a 10 pay policy, the cash value grows faster as a portion of paid premium goes towards it.
10 Pay Life Insurance Pros and Cons
One of the main benefits of this insurance plan is that it allows the insured to pay off their premiums in a shorter time, saving them money in the long run.
Pros of 10 Pay Life Insurance Policy
Some other benefits of this insurance policy are:
Lifetime Coverage: The coverage of this plan can’t be finished as long as premiums are paid and policy loans (from cash value) don’t exceed the entire cash value limit.
Living Benefits: With 10 pay insurance, the policyholder can use a portion of the death benefit to pay for medical expenses in case he has a particular medical condition or a terminal illness.
Tax-Deferred Cash Value: This insurance coverage is all set to accumulate cash value each year on a tax-deferred basis. The insured can use policy loans and withdrawals to pay for a big purchase, provide funds in times of need, or add to their retirement income.
Plan Dividends: A dividend may be paid on a 10 pay whole life insurance plan. With these funds, you can pay your premiums, take them as cash, or leave them with the insurance company to get some interest.
Cons of 10 Pay Life Insurance Policy
Now let’s discuss some of the drawbacks of this insurance plan:
Expensive Premiums: Whole life insurance is already much more expensive than term life, but with 10 pay’s distinct payment methods, premiums get more costly. The insured may require a lot of cash upfront to cover the full cost of the plan.
Chance to Miss a Payment: Keeping your costly payments would be difficult and if you fail to keep your plan on a good table, you will ultimately lose the coverage.
Limited Cash Value Option: With traditional whole life, the insured can build the cash value for their entire life, not just for a limited period. But with 10 pay, they are just allowed to build the cash value until they are paying the premiums (for 10 years only).
Who should get 10 Pay life insurance?
This insurance plan is the best fit for people who want to pay their insurance policy in a shorter period while having the security of a whole life plan. Moreover, it is also ideal for those who are near their retirement age and want financial protection for those they care about, in the event of their sudden demise.
Additional Tips for Getting 10 Pay Life Insurance
Following are some of the tips to follow while buying 10 pay insurance plan:
- Compare various policies from different insurers to find the best rates and coverage options that suit your budget.
- While choosing a plan, always consider the premium amount, cash value, and death benefit.
- Select a famous and reputable insurance provider with a good track record of paying claims after the insured’s death.
- Consult a licensed and experienced insurance agent to help you find the best insurance plan for your needs.
Alternatives to 10 Pay Whole Life Insurance
Based on your coverage needs and budget, here are some of the life insurance policy types that can be a better alternative for a 10 year pay whole life insurance.
1- Traditional Whole Life Insurance
Whole life insurance pays the same benefits just like 10 pay policy, but its payment schedule is different. With this policy, the insured has to make the payments for their whole life but premiums will be lower as you can expect to pay with a 10 pay plan.
2- Term Life Insurance
Term life insurance plan is the most reasonable type of life insurance in every situation. It only lasts as long as the policyholder needs it, although it comes with few tax restrictions and regulations. Moreover, it doesn’t have a cash value component but it could be a better fit if you want a life insurance plan for income replacement.
3- 20 Pay Life Insurance
It is another limited pay life policy but instead of having a time of decade, you can pay the premium payments over 20 years. Moreover, your premiums will be cheaper than a 10 pay plan and you won’t have to pay premiums for the rest of your life.
4- Final Expense or Funeral Insurance
This insurance plan has a small amount of coverage to assist you with end-of-life expenses. Its premiums are lower as compared to 10 pay life insurance. So if you all need a plan to cover your burial and funeral costs, final expense insurance will be the right option for you.