Choosing the best term insurance is a long-term decision since it will help financially safeguard your family in case something happens to you down the line. Regarding term insurance, the most important factor is, of course, the coverage that you opt for since it has to beat inflation and also take care of your family’s needs in the future. However, the second thing that you should select carefully is the tenure of your plan. Should it be a longer duration or a shorter one? That’s where several factors come into play.
Choosing the Right Policy Period- Things to Remember
Here are a few things that you should keep in mind while choosing the tenure for the best term insurance plans.
- A good way is to select a plan where the premium-paying duration or policy tenure ends just before you retire. This is because you may no longer have major financial responsibilities at this stage and no active income to replace as well.
- Your age also matters since the younger you are, the lower your premium for your chosen tenure. Gender also comes into play since women sometimes get discounts/offers due to perceived lower death risks.
- The higher your sum assured, the higher your premium and vice versa.
- Non-smokers also get discounts on their premium payments.
- Also, if you choose an increasing sum assured, then the premium will go up over a certain period in comparison to a level sum assured amount.
- Most insurers offer policy tenures between 5 and 40 years, and you may use your retirement age as a rule of thumb when selecting the policy duration. Some insurers also offer term insurance policies with coverage extending up to 99 years of age, subject to eligibility criteria.
Also Read: How to Evaluate the Best Term Insurance Plans Based on Your Needs?
Age-Wise Tenure Selection Tips for Best Term Insurance
If you’re in your 20s and want financial coverage for a longer duration, then it may be better to choose the best term insurance policies with tenures of at least 35-40 years. You can also consider plans that offer coverage till the age of 99, depending on availability and your eligibility, since you’ll be getting a reasonable premium amount due to your age and lower perceived death risks.
In the 30s, you can also consider coverage till the age of 99 or opt for a 30-year tenure at least. A simple way is to get coverage until you retire. In your 40s, depending on your financial responsibilities, you may choose a 20-year tenure till you retire or even 25 years in some cases. In your 50s, your children may have started their higher education, and a tenure of 10-15 years may suffice in some cases, depending on your liabilities. You can also consider plans with coverage till the age of 99, if you meet the insurer’s requirements.
When a Longer Tenure Works
These only work if you get your term plan at a younger age, and if you lock in a more affordable amount for a longer duration, then it’s a win-win since you’ll have to cover your family throughout your working years. Also, you have to get financial coverage for the entire duration of your liabilities, like loans and other debts, while keeping financial goals in mind. While you’re fulfilling them, if something happens to you, then the term insurance plan has to cover the same.
When a Shorter Tenure Could Be Better
Suppose you’re already at an advanced or mid-stage of your career and want to align your coverage with key responsibilities. In this case, a shorter tenure till your retirement or till you’re paying off liabilities or paying for your children’s higher education may work better. It may not be wise to pay a higher premium at an older age for a longer duration since you’ll be looking to build your retirement corpus swiftly in this period. Hence, you can choose a shorter tenure till the point when you no longer have financial responsibilities to fulfil or dependents, provided it still gives you adequate financial protection during that time.
Concluding Notes
So, as you can see, the best term insurance tenure is one that gives you maximum financial coverage depending on your goals, age, liabilities, intended retirement age, and other specific circumstances/factors. Assess all these aspects carefully and then decide accordingly.
