A term insurance policy has been in the market for the longest time. Since it is a sub-subject of traditional life insurance, the primary objective of a term plan can be to offer financial protection to your loved ones. Let’s understand the term insurance meaning in detail to make informed decisions in the future:
As the name suggests, a term policy can offer financial coverage for a specific duration. The tenure of the term policy can be 15, 25, or 35 years. Selecting the right tenure of the term policy can be crucial in determining the financial sustenance of your family. Although a term policy can offer financial protection, many of you might be confused about its tenure.
To avoid confusion at the time of purchase, let’s go through the top four factors that can help you to choose an ideal duration of your term insurance plan.
- Consider the financial dependents
When you are young, you might have fewer or zero financial dependents. However, there can be a rise in the financial dependents as you turn old. Based on your current scenario, you should consider the financial dependents in your family before you choose a term policy for a specific duration. If your dependents include your spouse and your children, you should buy term insurance for a long period. Moreover, consider their age and timelines to avoid opting for a long-term tenure by paying a high premium value.
- Evaluate your financial goals
Before you buy term insurance, you should ask yourself the basic question, such as ‘Will I be able to fulfil my financial goals by the time I enter the next decade?’ If you have a specific timeline to reach your goal in mind, you can easily determine the duration for which you require a term plan. The timeline can play a crucial role that can help you identify to the tenure of your term policy. Many of you might have a particular age in mind to retire.
- Analyse the inflation rate
Analysing the inflation rate can be a crucial factor for selecting the right tenure of the term policy. If you choose a long tenure, your coverage needs can be high. However, a high cover should be chosen only after taking the current rate of inflation in mind. If you do not consider the inflation rate, the selected term coverage can fall short in the next 10 years. As a policyholder, you might end up paying more term insurance premium until the completion of the on-going tenure of the policy.
- Purchase at the right age
Another critical factor that can play a major role in the selection of the ideal term insurance tenure can be age. When you are young, you should opt for a longer duration. With a long tenure, you can easily cover your growing needs and dependents. If you buy term insurance policy in your 40s, you can opt for a shorter duration due to minimal financial dependents and liabilities.
In a nutshell, selecting the right term coverage can be as essential as choosing an adequate coverage amount. With these top four factors, you should pick an ideal tenure based on your financial goals and the needs of your family. If you choose a shorter duration, your family might suffer financially in your absence. Select a tenure that can help them maintain their standard of living in your absence.