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What Should Be the Duration of a Term Insurance Plan?
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Term insurance policies are standard life insurance policies that offer life coverage for a fixed duration or ‘term’ stated by a policyholder at the time of purchase. In the event of an insured person’s unforeseen demise, a term insurance plan will pay the assured sum to that person’s nominee.
However, choosing the right duration of term insurance can be challenging owing to the availability of many insurance policies in the market. So, keep reading to know the factors you must remember while choosing insurance tenure.
What Are the Factors to Consider When Choosing the Duration of a Term Insurance Plan?
Age
Age is a significant factor you must keep in mind while choosing the duration of your term life insurance policy. The earlier you opt for a plan, the lengthier will be the tenure you get. For instance, a 26-year-old person choosing a term life insurance plan is entitled to get a duration of 50 years. On the other hand, if an individual buys an insurance plan at 50 years of age, that person will get a duration of 30 years.Financial Goals
Being a family person, it is always a concern for you to take care of your loved ones and achieve the necessary financial goals at different stages of your life. Having term life insurance will guarantee the financial protection of an insured person and their family in case of the sudden demise of the former.
Hence you should choose a policy term cautiously so that all necessary financial goals of your family are achieved with the assured sum in your absence.
Liabilities
If you have outstanding debts, your insurance policy coverage must be equivalent to the unpaid loan amount, and the tenure must be the same or more than the duration of EMI. Therefore, even after an insured person’s death, the family will not face the loan burden, and the insurance earnings will enable them to clear the liabilities.Cost-Effectiveness
While choosing your duration of term insurance, try to go for a longer term. Remember that the longer the duration of the policy, the lesser will be the amount of premium. Therefore you need to decide on an adequate cash flow and savings so that you can easily pay off the premiums for the entire tenure.Maximise Tenancy
You should always be prepared for financial emergencies. This is why you should opt for the maximum tenure available per your age and profile while purchasing a term life insurance policy. For example, if your age is 25 years and you need life insurance coverage for the next 30 years, you can choose a tenure of 40 years, as there is no telling when a financial crisis will occur.What Is the Right Duration of Term Insurance Policy?
Choosing the duration of term insurance is an important task while opting for the policy. If you choose a duration of protection for the long term, your premium will be more. This is among the main factors that determine the premium of your term insurance premium. Generally, maximum insurance providers offer a policy duration between 5 years and 40 years. While availing of a term insurance plan, focus on your retirement age.
For example, if you choose 60 years as the retirement age, someone may opt for 65 years as the retirement age. Remember that insurers generally focus on young individuals for providing term life insurance plans owing to their stable income and fewer chances of death. However, while buying a term insurance policy, there are several technical terminologies and their meaning that you should understand.
However, while buying a term insurance policy, there are several technical terminologies and their meaning that you should understand.
FAQs About Duration of a Term Insurance Plan
Can the duration of the term insurance plan be extended?
What is the age limit to opt for a term life insurance plan?
Can the tenure of term insurance be extended?
What are the tips for choosing a term insurance plan?
Mentioned below are the top five steps to choose the best term insurance plan for you:
- Focus on your dependents
- Consider your prevailing lifestyle
- Analyse your income
- Determine the existing liabilities
- Verify the claim settlement ratio of insurer
Other Important Term Insurance Guides
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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