A term insurance policy can have varying duration’s but you should be clear one the tenor that fits your needs in the best possible manner.
When it comes to buying a term insurance policy, you will naturally want to look at the best term insurance plans and compare them on the basis of various factors as the premium and sum assured. However, you should also look into the duration of term insurance plans since this is a vital factor affecting your overall benefits from this investment.
Term and type of insurance:
Term life insurance is the most basic type of insurance since it offers coverage against the death of the policyholder due to accidents/natural factors. These life insurance plans are provided for a fixed time period and offer financial assistance to your family in case of death. However, while taking a look at your overall coverage, you should also scrutinize the duration carefully.
Coverage usually depends on factors like the annual growth of your income, future requirements like the education of children and the daily financial needs of the family.
The duration also depends on your own age, liabilities, retirement age, financial condition, and overall lifestyle. You have to make the best possible decision when it comes to the duration of a term insurance policy. Your duration should be equivalent to the time period for which your family members/nominees will financially dependent on you.
However, prior to choosing this duration, you should be clear about amounts that you need to repay your outstanding debts and other liabilities and any other liabilities that will crop up in the future along with financial needs of the family if you are not present. You should also consider how long will a certain sum last for covering expenses after covering all debts. Take into account one-time costs like weddings, education costs, and health/medical expenditures.
Take into account the duration of liabilities that you have prior to choosing the tenor of your term insurance plan. For instance, if your home loan or any other loan will run for 15 years, the minimum duration of the term plan should be 15 years as well.
Long-term plans and coverage:
The term coverage should not compromise your current financial situation. Long-term plans usually are costlier so choose your options with care. Term coverage is planned to provide ample support for your family in the event of your demise. However, this will not run forever and hence you should plan accordingly.
For example, if your child is 20 years old and you have to support him/her till post-graduation and landing his/her first job, then you have to plan for at least 7-8 years. This has to be extended in case you wish to get adequate financial support for your child’s wedding as well. You also need to take into account medical requirements and support for your spouse. Once you have everything chalked out, you can decide on a suitable duration for your insurance plan.