When buying a term life insurance plan, there are several factors you may have to decide on. One of these is the duration of your term insurance, meaning the number of years you want your term plan to offer you a life cover.
But how do you decide the duration of your term insurance plan? What other factors does this decision depend on? Before you understand how to choose the right duration for your term life plan, it is necessary to have a clear understanding of what term insurance is, and the various factors you ought to consider while buying a policy.
What is Term Insurance?
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A term life policy is one of the plainest forms of life insurance available today. It offers you a life cover for the duration and the sum assured selected by you when buying the policy. In return, you are required to pay premiums to the insurance provider. To get a better idea of how much premium will you be required to pay for the sum assured and duration you seek, you may use a term insurance calculator.
These calculators are easily available online on websites of insurance providers as well as third-party insurance aggregators. The figures given to you by these calculators are estimates. The final premium amount you may be required to pay will depend on the customisations you add to the plan. Nonetheless, using term insurance calculators will help you get a better idea of what figure to expect as a premium amount.
When buying a term life plan, some of the common factors you may need to decide on include your sum assured, duration, and other plan specifications such as riders and benefits.
Term Insurance Duration
Of these, duration is a factor that decides how long your term cover will be. Typically, term life policies do not offer life-long coverage, as opposed to some other types of life insurance, such as whole life insurance.
Instead, limited duration is available with term insurance, meaning, these plans are available only for a certain number of years. Usually, term life plan durations start as low as 10 years. Some plans may be available for five years as well. These plans typically do not offer coverage beyond 65-75 years, thus the maximum duration they are available for is 45-55 years.
These details may differ across policies and insurance providers. Before you buy a term insurance plan, take the time to read through its features and consult an insurance agent or insurance provider representative if you seek clarity on the same.
How To Decide Life Insurance Duration?
Now that you have a better idea of what term insurance is, and how duration is an important factor when buying one, let’s look at how to decide the term plan duration.
Buying a term plan for too small a duration can rob you of the benefits of the plan and end up making the plan worthless for you. On the other hand, it is not advisable to buy a plan for the maximum duration if it burns a hole in your pockets.
So, how do you choose the right duration for your term insurance plans? To put it simply, it is ideal to get a term plan coverage for as long as possible without letting it affect your finances today. However, that may not be ideal for everyone, given that term life plans are simpler plans with relatively lesser additional features.
For example, if you are in your 20s and have purchased a term life plan, you may be planning on getting a different type of life insurance as soon as you start earning better. In such cases, it is better to buy a term plan for a duration of about 10 years.
On the other hand, if you are close to your retirement (late 50s) or have recently retired (early 60s), remember that you may not be eligible for a term plan duration longer than 10-20 years. In this case, it is ideal to opt for the maximum duration if this is to be the only life insurance plan you are planning to have.
If you are anywhere in your 30s, 40s, or 50s, and are planning to buy term insurance, it is ideal to opt for the maximum possible duration. Go for the maximum coverage so you can rest assured about the future of your loved ones when you are not around.
Along with the duration, the sum assured is another important factor to consider. Choosing these factors carefully can help you build a sound term insurance plan that suffices for the needs of your loved ones after you are gone.
If you have any uncertainties about the best insurance plan for you, we recommend seeking professional advice. At www.accuracy.com there’s a team of experts on hand to help you make informed decisions.
Also Read: Latest Trends That Will Affect Insurance In Following Years
