Life insurance is a critical factor in financial protection of your family, and it is important that you choose the options that will suit your family’s needs.
Your term insurance’s duration is one of the most important factors that you should get right when buying a new term policy. Let’s take a look at some of the points that will help you choose the right tenure.
- Your debts and liabilities
Ideally, your term life insurance should comfortably cover your debts and even after that, your family should have a decent amount of money at their disposal to take care of their financial needs.
Here, it is important that your term insurance covers the whole duration of the repayment schedule of your loans.
For example, suppose you have a home loan that will be repaid in 10 years. Then your term insurance should be a high paying one with tenure or ten years or more. This will help your family cover the whole loan amount if something is to happen to you before the loan is completely foreclosed.
- Affordability – Affordability is one other important factor. A longer tenure could mean a bigger premium. In this situation, it’s advisable that you don’t compromise on the insurance amount. Rather, try and get a term insurance for a shorter tenure and by the time you have to renew it, you can take a term plan for a longer term, if it is affordable for you then.
- Duration of support – It is important that you choose a tenure that will last till the time you think your family will need your financial support.
For example, if your child is now 15 and you think they will be financially independent at the age of 25, you can consider choosing a tenure of ten years with a high insured sum.
Choosing like this is considered more ideal than choosing a longer tenure with a lesser insured sum.
- Purpose of the insurance – If your term insurance has a specific purpose, you could consider that as well while choosing a tenure.
If we take the same example above, if your loan tenure is 10 years, it’s ideal that you get insured for a high amount that covers the loan and the financial needs of your family, with a tenure of at least 10 years.
After your loan account is closed, you could go for another term plan with a slightly lower insured sum.
- Your age
If you are young, the insurance premiums will be substantially lower. This is because insurance companies price their premium according to risk. At a younger age, your health could be optimal, and the chances of your insurance being claimed are considered lower.
So, if you are in your 20s, choosing a longer tenure could save you some money.
You could also add a rider that guarantees renewal without a medical check-up and take advantage of your optimal health.
At the same time, if you are a middle-aged person, tenure should depend on what specific purpose your term insurance has.
For example, if you have debts that you think you can pay back only in a certain period of time, then you should have a term policy with a high insured sum for that time period.
- Dependents’ age
Your dependents’ age is another factor that should play a role in determining your term insurance tenure.
If you have kids, it’s always ideal to get insured for a longer tenure, at least until they are adults. This will make sure you cover their education and life expenses if you ever have to leave them behind.
But, at the same time, in your old age, you can go for a shorter tenure, especially if your only dependent is your spouse.
A proper term insurance means you have chosen the right options, including your term insurance duration. It could get confusing for you, especially when there are a lot of factors at play.
One way to make this easier for you is to research. There are plenty of resources available online and it is advisable to make the best use of them.
Also, reaching out to an insurance expert could help you a lot. Most insurance broker websites will provide you with valuable advisory.
If you are not yet insured, get proper advisory, and get insured today!