Keeping in mind the evolving lifestyles, ever-rising inflation, and the rapid cases of critical ailments, understanding the importance of term insurance is crucial. Also, while opting for a term plan, you might ponder upon the ideal term for your policy.
In this article, we will talk about everything related to a life insurance term policy, which will help you decide on buying one right away!
What is a Term Insurance Plan?
If you have no solid idea about what term insurances are all about, we’ve got you covered. In simple words, term plans are an agreement between the insurance companies and the policyholders, where in case of the untimely demise of the policyholder, a specific sum of amount is paid to the insured’s beneficiary by the insurance company. Regarding long-term financial planning, such term plans play a very important role in the policyholders’ life.
Another crucial aspect to consider regarding term insurance is that it is also one of India’s purest forms of life insurance policies. Therefore, such term plans offer comprehensive monetary protection to the policyholder’s family members in case of the latter’s untimely death. However, there are no maturity benefits involved.
So, according to the rules of reputed insurance plans you buy, your family will be covered for a sum assured if you die within the policy term period. If you survive the policy term, you will not get any survival benefits or payouts.
Factors to Consider While Buying a Term Insurance Plan
While opting for a term plan for yourself, keeping in mind the below-listed factors is important –
- Your Age: The duration of your term policy will depend upon the age when you would buy one. So, it’s always a smart decision to buy term insurance while you are still young. The younger you are while buying a term policy, the longer the term duration would be. Additionally, buying younger also assures a lower premium cost.
For instance, a 30-year-old policyholder can avail a term plan duration of 50 years. At the same time, a 50 years old policyholder will only be provided with a 30 years tenure.
- Financial Objectives: As a family, you might have certain milestones to achieve. You need to be aware of all of them as it will help you choose term insurance accordingly. So that you can be rest assured that even if you meet your untimely demise during the term plan tenure, your family will not have to suffer a huge financial loss while completing those milestones.
- Financial Liabilities: If you need to pay off a debt, your term plan cover should be equal to the unpaid loan amount, and the term tenure should be equivalent to or more than the duration of the EMIs. If an unfortunate incident happens and you lose your life, your family won’t have to deal with the stress of paying the huge loan amount.
- Premium Rates: While searching for a term insurance plan, you also must pay attention to the premium rates. The longer the term plan, the lower would be the premium rate as insurance companies offer discounts on long-term plans. So, before opting for a term plan, do consider your cash flow and savings. It will help you to decide whether you’ll be able to pay the premiums without disturbing your normal life or not.
The Ideal Tenure for Term Insurance
The age limit of term insurances differs from one insurance company to the other. Usually, the insurers provide a cover of the life assured up to 75 years to 85 years. Some plans such as the Tata AIA term plan offer whole life cover up to 100 years of age.
So, if you are in your 20s, it’s better to opt for a 35-50 years term insurance plan. This way, you will be assured till the age of your retirement.
On the other hand, if you are in your 30s or 40s, you’ll probably have a family. So, always decide on a term plan by calculating the premium amount you can easily pay off every month.
However, in your 50s and 60s, you can go for a short, pocket-friendly plan of 15 to 20 years.
Conclusion
A term insurance plan can provide you with the relief of keeping your family out of any financial woes even after your demise. However, there are several other benefits of term insurance. Hence, it’s important to choose a term plan well. So, do not forget to research well before deciding on a term plan for yourself.
