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What should be the Duration of a Term Insurance Plan?

dateKnowledge Centre Team dateFebruary 07, 2023 views611 Views
How Long should my Term Insurance Cover be?

Choosing the right tenure for a term insurance plan you are planning to buy can often lead to confusion. If you decide on a shorter duration, the protection wouldn't be enough for your financial needs. If you choose a prolonged period, you will pay more premiums than required. That is the reason it is essential to choose the right length of your term insurance policy considering your financial needs.

A term insurance plan covers you for a certain period or 'term' of your life. If the policyholder passes away within the policy term, the death benefit is paid to the beneficiaries/nominees. Hence, choosing the right duration of your term insurance plan is a crucial factor for your family's financial protection.

How to Decide the Duration of your Term Plan?

Generally, it is said to have the term plan active during your working years. So, it depends on the age at which you buy the plan. But is age the only factor that will help you decide the duration of your term plan?

Three other things to be considered while choosing the duration are - your financial goals, liabilities, and lifestyle habits.

Let us understand these factors in detail.

  1. Financial Goals

    In life, you will have various milestones to achieve. For example,

    • You get married
    • Plan for a kid
    • Save for the higher education of your kid
    • Create a corpus for your retirement

    You need to think about the financial protection of your loved ones on each of these milestones. With a term plan, if something happens to you, the death benefit will help your family cope with the financial loss.

  2. Liabilities

    The term insurance cover should pay for any liabilities that you have. For example, if you have a home loan. You pass away without repaying it. A term plan will help in repaying the remaining unpaid amount. It will take off the financial burden your family may have to bear in your absence.

    Learn - how to protect your home loan with a term plan.

  3. Lifestyle Habits

    If you have any lifestyle habits such as consumption of tobacco or alcohol - then you must rethink the duration of your term plan. Such practices may lead to a higher susceptibility to critical illnesses. Treatment of these illnesses is expensive and may cost people their lives. A term plan with critical illness cover may help to manage the cost of such treatment.


What is the Ideal Duration of a Term Plan?

Most life insurance companies offer coverage for up to 75-85 years of age, while some may offer coverage till the age of 99. It varies from insurer to insurer. Evaluating the correct duration of a term insurance plan is critical. You need to plan about the finances if something happens to you.

Let us understand what happens when you buy a term plan at different ages:

  1. If you are in your 20's

    • Buying a term insurance depends on your current age and retirement plans. Let's say you are in your 20's and are likely to retire by the age of 60. You must go for a 35-40-year term plan. It will get you covered until your desired retirement age.
    • It is good to think and plan for your future. If you buy a term plan at this age, the premium will be low. It will be affordable for you. Hence, it is always said to buy a term insurance plan as soon as you start working.

    Understand the reason you should buy a term plan early.

  2. In your 30's and 40's

    • When you enter your 30's or 40's, you will likely get married and start your family. Now that you have people who are dependent on you, you should start thinking about buying term insurance plans.
    • At this age, you should opt for a duration of 35-40-year term insurance, depending on your financial needs and retirement plans or employment type.
  3. In your 50's and 60's

    When you are older, around 50-60 years of age, by this time, your children will likely be settled, and the burden on you to work and pay bills will be low. At this age, you can opt for a term plan for a 15-year term.

    Read to know if you should buy a term insurance plan in your 50s.

    The premiums you will pay in a term plan will remain the same throughout the policy tenure. However, remember that the premium amount depends on a wide range of factors, such as age, gender, lifestyle habits, occupation, etc.

    Take your retirement age into consideration while deciding on the term cover. As yourself questions like how long your family members will be dependent on you financially, and when will the liabilities you have be over. Such questions will help you gauge the right answer.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.

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