TomorrowMakers ™

How to choose the right term for your Term Plan

17 June 2015
Term insurance is preferred over other insurance plans because it provides a life cover for just as long as you need.
 
 

Term insurance is preferred over other insurance plans because it provides a life cover for just as long as you need. This means you need to pay the premiums only till you need the cover, making it the cheapest and the most flexible option among the lot.

But how long should your term plan be? If the policy is too long, it can lead to unnecessary expenditure. If the plan is too short, it can lead to financial discomfort for the family when they least expect it. The ideal length of a term plan is -different for each one of us.

Before narrowing down your ideal term plan, ask yourself:

  • What financial difficulties will my family have to face on its own if I am no longer there?
  • How long will it take for my family to be rid of these difficulties?

Keep these questions in mind and consider the following:

1. Liabilities

Liabilities like mortgages and loans need to be paid over some period of time. Ideally, the term of your policy should incorporate this time frame. For example, if your home loan will take 15 years to be paid off, then the term must last at least 15 years.

2. Commitments and Dependents

If your dependents have a few years before being financially independent, that duration can be the length of your term. Landmark events like a wedding or a settled career should be well within the term duration so that your family can cope with the financial uncertainties.

3. Length of Support

The sum assured of your policy is meant to aid your family during a stressful period. It is up to you to decide if the sum assured should last the family for many years or just support the family until they get back on their feet. Some plans can be long enough to last till retirement.

4. Affordability

At this stage, you might think that a long term cover is the one for you. However, long term plans are more expensive than the rest. Will the premiums be easy for you to pay off? If you think that the premiums will cause a financial strain, drop a few years from the term. 

 

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