What is the ideal term insurance tenure you should have?

When you narrow down the company you want to buy a term insurance plan from, you start to research other aspects of the plan such as what is term insurance, sum assured coverage to go for, whether the need for additional riders is required or not, etc. One of the questions policyholders are stuck on is the tenure you should choose.

What is the ideal term insurance tenure you should have?

Choosing the appropriate tenure for a term insurance plans that you intend to purchase can be difficult. If you choose a shorter duration, the protection will not be adequate for your and your family’s financial needs. If you choose a longer duration, you will pay higher rates than necessary. That is why it is important to determine the appropriate length of your term insurance coverage based on your financial requirements.

If you don't know much about what is term insurance, a term insurance policy provides coverage for a specific length of time, or 'term', in your life. If the policyholder dies during the term insurance policy term, the death benefit of the insurance is paid to the beneficiaries/nominees. As a result, selecting the appropriate duration of your term insurance policy is critical for your family's financial security.

How do you determine the duration of your term plan?

In general, the term insurance calculator should be active during your working years. So, it is dependent on the age at which you purchase the plan. But is age the sole element that will influence the duration of your term plan? Three other factors to consider when determining the duration are your financial goals, liabilities, and lifestyle choices. Let us look at these issues in greater depth.

Financial Goals: You will encounter a number of milestones throughout your life, such as getting married, planning for a kid, saving for higher education, and creating a corpus for retirement. At each of these milestones, you should consider your loved ones' financial security. If you die while insured under a term plan, the death benefit will assist your family in dealing with the financial loss.

Liabilities: Your term insurance policy should cover any liabilities you may have. For instance, suppose you had a property loan, and you died without repaying it. A term insurance plan will assist in settling the remaining outstanding balance. It will alleviate the financial strain that your family may have to suffer in your absence.

Lifestyle Habits: If you have any kind of lifestyle habits, such as smoking or alcohol, you should reconsider the length of your term plan. Such activities may increase vulnerability to critical illnesses. Treatment for these conditions is costly and may result in death. At this time, when you start to research term insurance plans, you will come up with the option of adding critical riders to your term insurance. A term plan with critical illness coverage could help you manage the cost of such treatment. 

So, what is the term plan duration I should go for?

Most life insurance companies provide coverage for people aged 75 to 85, with others offering coverage until the age of 99. It varies across insurers. It is vital to determine the appropriate duration of a term insurance plan. 

Let's see what happens when you buy a term plan at different ages.

If you're in your 20s, Purchasing a term insurance plan is dependent on your current age and retirement plans. Assume you are in your twenties and intend to retire by the age of sixty. You must choose a 35-40-year term plan that will cover you till your desired retirement age. It is beneficial to consider and plan for your future at this age. If you get a term plan at this age, your premiums will be small and will be affordable to you. As a result, it is always recommended that you purchase a term insurance policy as soon as you begin working.

In your thirties and forties: When you reach your thirties or forties, you are likely to marry and start a family. Now that you have dependents, you should consider purchasing term insurance. At this age, you should choose a 35-40-year term insurance policy based on your financial circumstances, retirement goals, and career type. This is also the time you might want to add riders to your policy. 

In your fifties and sixties: When you get older, about 50-60 years old, your children will most likely be settled, and the stress of working and paying bills will be reduced. At this age, you can choose a term plan for 15 years.

What age should I acquire term insurance?

Well, the answer is that as soon as you have dependents, family ambitions, or liabilities, you should purchase term insurance. If you are planning for a family, you should take a term plan right away, even if you don't think you'll need it in the future. One of the biggest reasons for that is that as you age, the premium you pay for the same coverage will rise.

For example, if you are a 30-year-old non-smoker, you may obtain term insurance with a cover of Rs 1 crore until the age of 60 for an annual premium of approximately Rs 7,400. The same coverage for a 45-year-old non-smoker would cost around Rs 14,700.

Furthermore, the premium for term insurance is constant. This means that if you are a 30-year-old in the instance above, you will continue to pay the same term insurance premium for the next 30 years, with no changes except for taxes.

You should also consider how long you'll need term insurance coverage. Ideally, term insurance coverage should last at least until your retirement age or until you have financial dependents or financial responsibilities such as loans.

So, we are saying,

Consider your retirement age before opting for term coverage. Also, take into account how long your family members will be financially dependent on you, as well as when your liabilities, such as their education, marriage, and other responsibilities, will be over.

Such questions will help you determine the correct answer. And the premiums you pay under a term plan will remain constant throughout the policy's duration.

Remember that the premium amount is determined by a variety of features, including age, gender, lifestyle habits, occupation, and so on.