The policy tenure is the most significant aspect of a term insurance plan as it decides the duration of your coverage and the amount of your premium. It is essential to understand the factors that influence policy tenure and decide on the ideal policy tenure that suits your needs.
Through this article, we will discuss the factors you need to consider when deciding the policy tenure for your term plans. You can also use a term insurance calculator to determine your coverage amount and premium cost for your term life insurance policy.
How to Choose the Term Insurance Tenure?
Keep certain factors in mind when choosing the term insurance tenure of the policy:
- You Age
Age is an essential factor when deciding your policy tenure as different policies will have a different minimum and maximum entry age. Opting for longer tenure for a term insurance plan is advisable as it has several significant benefits-
- A longer tenure ensures you are covered for an extended period, providing financial protection to your loved ones for many years.
- A longer tenure helps you keep the premiums low, as the risk is spread over an extended period, which makes the policy more affordable to maintain.
- If you buy the policy at a younger age, you can lock in a low premium rate even with a long policy tenure.
Policies such as Tata AIA term plans come with a life cover of up to 100 years of age, ensuring that your family receives lifetime life insurance coverage.
- Family composition and obligations.
It is important to understand the term insurance tenure of the policy relies on your family’s composition and the financial goals you have set. Therefore when you align the tenure of your policy with these important milestones, you can ensure that your family is financially safe and secure even if you are not around to support them.
For example, let us say you want to ensure coverage until your child finishes school, which means coverage of around 16 to 18 years; you can choose a term plan with a similar duration.
- Based on loans and liabilities.
Throughout our life, we tend to obtain various loans, be it a personal loan or a home or car loan. It is essential to be calculative regarding its repayment as no one wants their family to inherit their loans in case of an unfortunate event.
Therefore it is essential to plan your liabilities by choosing a term plan that allows significant coverage equal to or greater than the balance loan amount, i.e., the duration of the EMI period. For example, if you have taken a home loan for 20 years, your term life insurance should give you coverage for 20-25 years.
- Based on affordability.
It is important to remember that long-term insurance policies can be expensive if purchased later in life. However, if you have no choice but to buy a term insurance late, go for a policy period that will allow you to opt for lifelong coverage.
You can keep the policy term long; however, if you want to pay affordable premiums, ensure that you choose the coverage accordingly. Also, add only the optional riders you need and no unnecessary ones. This way, you can avail of term life insurance coverage for a policy term of your choice.
The policy term can help you keep your family secure under a life cover for as long as needed. Flexible policy term options also allow you to determine your premium payments so you do not overspend on your life cover. Going for a longer tenure is generally advised as it comes with extended coverage, lower premium amounts, and protection against future premium increases.