Traditional life insurance plans bring you financial protection for your loved ones and dependents be there an unfortunate event and something happens to you. It is one of the most primitive fears- what will happen to the family if I am gone? How can they sustain their current lifestyles? How do I make sure they will be well looked after, financially? Traditional insurance plans answer these questions effectively. In the case of Whole Life insurance, you know you are covered for life till the age of 100 years. But before you buy a term insurance plan, there are questions that pertain to the plan itself that need to be addressed and answered. These questions range from the amount of financial coverage you prefer, who the beneficiaries of this policy will be, how do you want the death benefits to be disbursed, among other details.
One such question pertains to the duration of the term insurance plan. What is the ideal duration for which you should seek term insurance cover? There are no standard answers here. Would a cover for 25 years be enough? 20 years? Do you even need a cover beyond a decade? Does a cover that lasts till 99 years of age suffice for your purpose?
There are a lot of factors at play when it comes to deciding the term insurance duration. Let us look at them one by one:
- Your overall financial trajectory: do you see yourself accomplishing most of your financial goals in the next decade? Or 20 years? If you have a reasonable timeline in mind, then you can easily figure the term plan duration out. Sometimes people have an age in mind by which they want to retire, ideally. Usually, that timeline should also dictate the duration for which you secure a term insurance plan.
- Dependents: Who are the dependents that you seek financial protection under term life policy for? The answer lies in the details. Does your partner earn too? Do your dependents include your kids? Will they have grown up in 20 years and be working themselves too? Would they still need financial protection just as much? You mainly need to account for your beneficiaries' ages and their timelines here. It will address the critical point of whether your family is going to get more or less dependent on you in the next decade or two decades. If the need is to serve financial protection for a decade, then there's no reason you should be paying a higher premium for a longer term plan duration!
- Inflation: Whatever the length of the insurance policy, you need to account for inflation in tandem with it. The longer the tenor of the policy, the higher the sum that will need to be assured. Why? Because inflation will mean that in order for your dependents to be able to access the same resources, they will require a much higher amount than they did a decade ago. This would, of course, lead to a higher premium. In the end, term insurance duration will also be decided keeping this in mind.
- Age: Your age also plays a crucial part in deciding the term insurance duration. How? If you are young and in your 20s, it is advisable that you opt for a longer policy period. At this juncture in time, your responsibilities and dependents are only going to increase. On the other hand, if someone is buying a life insurance when in their 40s, the term plan duration is much shorter as your liabilities as well as your dependents will be fewer.
In keeping with your possible needs, the Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Term Plan offers a range of 5-40 years to choose from. The real purpose of the term plan, which is catering to the financial needs of your dependents, should determine the term insurance duration. This is by far the most important yet most personal factor. The policy period should be enough to give your family the time to become financially independent. Once your family is financially independent, you no longer need to worry about whether or not they will be able to survive in your absence, financially speaking. Of course, the loss of life is going to be an incredible grief, but if they are already self-sufficient and financially independent, the need for term insurance vanishes.
