The meaning of the policy term is the maximum period the life cover in the policy will remain active. You must decide the policy term for your life insurance cover at the time of buying the policy.
Normally, you cannot change the policy term of a life insurance policy after purchasing. This is why you should choose the policy term of your life insurance plans carefully.
You may need to choose different policy terms for different policies depending on your life cover and financial needs. The following factors will affect your choice of policy term:
- The financial goal or need the policy will cover
- Your retirement age
- Partial or complete withdrawal rules from the policy
- Cash flow from the policy
- Maximum allowed policy term
Follow the tips given below to select your policy terms for different life insurance policies:
|Policy Type||Policy Term Recommendations|
|Term Insurance Plan||Minimum: The policy term for a term insurance policy should be enough to allow the cover until your retirement.
Maximum: Maximum allowed policy term for a term insurance plan is up to 99 years of age (iSelect Smart360 Term Plan from Canara HSBC Life Insurance)
|Guaranteed Savings Plans & Whole Life Insurance with a guaranteed maturity value||Minimum: Guaranteed savings plans usually offer a minimum policy term of 10 years. Thus, you need to use the policy for appropriate financial goals only.
Maximum: Maximum policy term of guaranteed savings plans like whole life insurance policies can continue until 99 years of age (100 years in some policies)
|Guaranteed Savings Plans with Moneyback option||Minimum: 10 years, same as guaranteed savings plans (iSelect Guaranteed Future from Canara HSBC Life Insurance)
Maximum: Up to 99 years of age. However, the cash flow term may be different. You should align the policy cash flows with your financial needs such as your child’s education fees and your retirement.
|Unit Linked Insurance Plans (ULIPs)||Minimum: 5 years
Maximum: Up to 99 years of age (Invest 4G ULIP from Canara HSBC Life Insurance). With tax-free withdrawals, it is often useful to have a ULIP plan to continue well after retirement. Once you have an adequate corpus, partial withdrawals build a tax-free pension stream for you.
|Pension Plans||Minimum: Immediate
Vesting age refers to the age when the annuity starts. Investing a lump sum amount in immediate annuity plans allows you to start receiving a pension after only one month or quarter.
Maximum: 10 years. Pension plans with deferred annuity options have a vesting age. The vesting age can range from 40 years to 65 years. Here your maximum policy term decides your entry age for these plans.
For example, if you want to start your pension at the age of 60 the minimum age of entry for you would be 50.
Under bonus-adding life insurance policies like saving plans and ULIPs, your choice of policy term also affects your fund value. These policies offer loyalty bonuses and wealth boosters which add to your policy value and investment growth.
The benefits increase with longer policy terms. Thus, the investors who continue in the policy for a longer term can achieve higher fund growth. Since you cannot change the policy term after buying, you should keep this factor in mind while buying the policy.