When you buy a term insurance policy, you must consider several factors, like premium amount, benefits, but most importantly, you must choose a suitable duration. Read on to know how to select the right tenure for your term insurance.
Many term insurance buyers feel confused about choosing the suitable duration for their term insurance. If you choose a short-term plan, it may defeat the whole purpose of purchasing an insurance cover. On the other hand, if you buy a long-term policy, you may be paying more premium than you should.
In India, most term insurance buyers tend to buy a policy for 10-20 years, as they believe that it is best to have coverage for a longer duration. But, most people do not have any logical reason for choosing the term life insurance duration; they tend to select the period randomly.
Remember, the primary objective of a term insurance policy is to secure your family’s financial future and support the dependent members until they become financially independent. This means when you are not around, the family member must be financially independent and meet their regular expenses without any hassles.
Most insurance companies in India cover the term insurance holders until they reach 75 to 80 years. Some insurers provide coverage up to 99 years. So, the insurance term may vary from 10-40 years or more based on the age at the time of buying the policy.
If you are not sure how to choose the right duration for your term plan, here are a few critical factors that you must consider for making an informed purchase decision.
· Know your affordability
The term insurance term has a direct effect on the premium. Typically, the term plans with longer duration tend to be expensive and vice-versa. So, if you find that your term insurance premium is unaffordable, you can adjust the policy term so that the premium becomes affordable.
· Age of the family members
The age of the family members is a critical factor that you must consider while deterring the term insurance duration. If you are newly married or have a young child who is five years old, it is better to choose a long-term policy for about 15-20 years. But, if all your family members are financially independent, you can choose a short-term policy.
· Liabilities
Another critical factor to consider while choosing the right tenure for your term policy is the debts or liabilities you have. If you are nursing a home loan or have any other big-ticket debt, choosing a policy that covers the loan duration is better. This will give your family much-needed financial protection against liabilities. In the event of your unfortunate demise, the family can use the pay-out to repay the loan.
· Current age
It would help if you chose the term insurance duration based on your current age. For example, if you are currently aged 35, you may still have about 25 years before retirement. So, it is better to choose a policy for 25-30 years so that your family has financial protection till you retire.
Final Word
The ideal duration of a term plan is subjective; you must assess your needs, financial condition and then choose the term plan duration accordingly. The policy must give you and your family maximum protection.