What Should be the Duration of Your Term Policy?
Life insurance is a necessity today, and it should be a part of your financial portfolio. When you are young, you may not think of investing in life insurance. With time, when you settle down in life and start a family, you feel the need to secure your family’s financial future.
We understand that life is uncertain. Therefore, it is essential that you plan your investments wisely to ensure the financial well-being in case of your untimely absence. Out of the various types of life insurance available in the market, a term policy is one of the most popular options. If you are wondering what is a term plan, then read ahead to understand its fundamentals.
A term plan is a simple life insurance policy that offers life cover and provides financial protection to your loved ones. One of the significant advantages of investing your hard-earned money in a term insurance plan is that you get a high life cover at a reasonable premium. In case of an unfortunate incident within the policy’s tenure, the insurer is liable to pay the sum assured to the nominees.
Besides the high coverage and low premiums, term plans offer you various riders (add-ons) that can enhance the policy’s scope. Riders are incredibly beneficial in times of need. So, select the add-ons that can meet your requirements. While purchasing term insurance in India, ensure that you opt for a maximum tenure to avail of long-term financial protection.
What should be an ideal duration of a term policy? It is one question that is frequently asked by people. Here are some factors that can help you determine the perfect period of your term plan.
- Age
Age plays a crucial role in determining the tenure of a term plan. It is advisable to invest in such a policy to reap the benefits of a low premium at an early age. The premiums tend to rise with age, as the risk of mortality also increases. Experts suggest that investing early and staying invested for a longer duration will help you avail of a cost-effective premium throughout the policy’s tenure. The minimum term insurance age limit in India is 18, and the maximum age is 65. For instance, if a person buys a term plan at the age of 25, he must remain invested until the age of 60-65. The policy’s tenure decreases with growing age, so start early and get the advantage of a high sum assured at a nominal premium.
- Current debts
No one would like their family to suffer from financial hardships when they are no longer around. You may have taken a car loan, business loan, personal loan, and housing loan. In case of any unfortunate incident with you, your family will have to face the burden of your liabilities. Therefore, it is wise that you keep the duration of your debts in mind while purchasing a term plan. For instance, if you have a home loan of INR 40 lakh for 15 years, then the tenure of the policy should be for a minimum period of 15 years. In case of a tragic incident within the policy term, your family can repay the loan from the death benefit received from the insurer.
- Affordability
When you are purchasing a term plan for a more extended period, the premium is expensive. Buying a term insurance plan is one of the ideal investment options to secure your family from financial challenges when you are not around. However, consider your income or finances before finalizing the duration of the policy. It is because ultimately, you will have to pay the premium throughout the policy’s duration.
There are numerous options that you will come across while buying term insurance in India. Therefore, opt for a reputed insurer with a healthy claim settlement ratio, a strong solvency ratio, a brand value in the market, and the one that offers the best features at a competitive cost.
