Buying a term insurance policy is a crucial financial decision. There are several things you must consider. You must choose the right sum assured to get sufficient coverage for the family; you must select the right insurance company to ensure the best service. Perhaps the most critical factor to consider is the term plan duration.
If you buy a long-term plan, you may probably be paying more premium than you should. If you choose a short-term plan, it may defeat the whole purpose of getting insurance cover. Most people in India believe that it is better to purchase a term plan for 10-20 years to protect the family for a more extended period. However, they don’t have any rationale behind choosing the term plan duration.
Remember, the fundamental purpose of buying a term plan is to secure your family’s financial future and give them the support they need until they become independent themselves. This means you would want to ensure that your family can carry on the usual expenses and maintain their regular lifestyle even in your absence.
Under the term plan, most insurance companies in India provide coverage until the policyholder reaches 75 years. Some plans offer coverage up to 99 years. So, depending on the age when you buy the policy, the coverage term may vary from five to 40 years.
If you are looking to purchase a term insurance plan, you must consider a few vital factors for choosing the proper term insurance duration.
Affordability
The term insurance term you choose has a direct impact on the policy premium. Typically, the policies with longer durations tend to be more expensive. So, suppose the premium for the term insurance duration you desire seems unaffordable. It is better to adjust the coverage amount and the tenure so that the premium becomes affordable. It does not make sense to purchase a long-term plan and be able to pay the premium.
Dependent family members
One of the most critical factors to consider while deciding the term insurance policy duration is the family profile. For example, if you have a young child and a housewife, they may entirely depend on you financially. In this case, it is better to choose a term policy for 20 years or more. This will help you provide coverage to your family until your child becomes financially independent.
However, if your family members are already financially independent, you can opt for a short-term plan. This will help you save on the premium paid, and you can use the money to invest in other instruments like mutual funds or pension schemes that can help build a corpus for the future.
Age at the time of buying the policy
Your age at the time of buying the policy is an essential factor that you must consider while deciding the term policy duration. If you are a 30-year-old individual, you may work for about 30 more years before you retire, right?
So, you can purchase a long-term plan for 25 years so that the coverage lasts till retirement. If anything happens to you during the period, the insurance pay-out will compensate for the loss of income to your family.
Final Word
So, now that you are aware of the different factors to consider for choosing the term plan duration, ensure that you assess your needs well and purchase a plan that perfectly suits your needs.
