Term Policy Period

Table of Content

1. How much should the policy period be?

2. Let’s look at the policy terms you can choose based on your age:

3. Why you should opt for a longer term:

4. FAQs on Tips to choose the right term policy

How much should the policy period be?

Understanding how long your coverage should last might be challenging. A smart rule of thumb is to choose a policy whose premium-paying period expires before you retire. Most policyholders choose term plans that expire when they plan to retire. The idea being that they no longer have a financial responsibility and they have no active income they need to replace. Before selecting the policy term, you must understand what impacts it.

Here are some of the important factors that affect your term insurance premiums:

• Age

  The younger you are, the lower your premiums.

• Gender

  As a woman, chances are you may get offers or discounts from companies as death risk is lower than men.

• Sum assured

  Premiums will be higher if your sum assured is higher as your coverage will also be more than usual.

• Lifestyle

  If you are a non-smoker, you may get discounts on premiums.

• Payouts

  The premium amount differs according to payouts. If you opt for increasing sum assured, your premium will increase over a period compared to level sum assured.

• Term

  If the duration of protection opted by you is longer than your premium will be higher. This is one of the primary factors that influence your term insurance premium. The length of the term is determined by how long you want to give financial security for your family in the event of an unpleasant incidence. 

  Usually, most insurance companies offer a policy term between 5 to 40 years. One should always opt for a policy term depending on their retirement age. It can vary of course. For instance, if you opt for 60 years as retirement age, there could be someone else who would opt for 65 as retirement age.

Let’s look at the policy terms you can choose based on your age:

• In Your 20s

  If you’re currently in your 20s, select at least a 40-year term or opt for coverage until the age of 99. You should opt for a long tenure since you can make the most of affordable premiums without having to renew the plan.

• In Your 30s

  Like when you’re in your 20s, a 40-year term or coverage until the age of 99 is ideal for your 30s. You can reduce the tenure based on your financial liabilities and when you intend to retire.

• In Your 40s

  By now your financial liabilities might have reduced. You can choose 40-year tenure to get coverage until you turn 80. If you’re purchasing a policy for the first time, you may have to pay a higher premium than if you were in your 20s or 30s.

• In Your 50s

  You’ve reached middle age and your children might have moved away for their higher education. A policy term of 25 years should suffice. However, you can pick a longer tenure of 35 years or opt to get coverage until the age of 99.

Why you should opt for a longer term:

• Fixed premium rates. Once the product is bought, the premium would remain same for the entire duration of the policy.
• If you are young, the premiums will be lower and will remain so throughout the term.
• You will remain insured – guaranteed -- for the entire policy term.

All you have to do is know how long your liabilities will endure. How soon will your children be independent? How long will you work? Most insurance terms mature at the age of 65; you can choose the duration of your plan based on your current age.

FAQs on Tips to choose the right term policy

Q: How do I know which term insurance is best?

You should compare term insurance plans from different insurers in order to choose the right one to secure your family’s financial future. To know which term insurance is best, check out its features, such as cover amount, premium payment options, add-on riders, etc., besides checking the insurer’s claim settlement ratio as well.

Q: How do I choose my term insurance amount?

Your term insurance cover should ideally be at least 10 to 15 times your annual or yearly income. For instance, if your yearly income is Rs 10 lakhs, opting for a 1 crore term insurance plan or more, would be advisable. Take into consideration factors such as your income, number of dependents, age, etc., when finalizing the insurance cover amount.

Q: What are the 4 types of term life insurance?

Different types of term life insurance include level term insurance, decreasing term insurance, increasing term insurance, term insurance with return of premium (TROP), convertible term insurance and whole life insurance.

Q: Are there any Tax Benefits offered with Term Insurance?

Yes. The premium you pay towards term life insurance is eligible to be claimed as tax deduction under Section 80C¹, upto a maximum ceiling of Rs 15 lakh per financial year.

Q: Key factors to consider while buying a Term insurance plan?

Factor in your number of dependents, income, age/life stage, existing liabilities, insurer’s claim settlement ratio, etc., before buying term insurance.

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