- Date : 23/03/2020
- Read: 4 mins
Pick a term plan that works for you, not one with the standard age bracket that advisors and brokers try to sell you.
A term plan is arguably the single most important financial tool that will safeguard your family’s future. Its need and specific functions could vary from one family to another. Yet many insurance agents and financial advisors tend to generalise the tenure of the cover and fix it at the standard retirement age of 65.
This may not always make sense. Does everyone retire – or are they done with familial responsibilities – by the time they turn 65? Not necessarily. So, here are some important reasons why you may want to review the coverage period for your term plan.
1. You may not retire by the time you’re 65
While the conventional age for retirement may stand at 60, not everyone is willing to hang up their boots so early. There are many examples from the entertainment industry and the entrepreneurial world where we see public figures who remain active way beyond that age. Many white-collared professionals too take consultancy roles or part-time gigs post their official retirement age.
If you can service your premium payments, there is no reason to limit coverage to a certain age. Alternatively, you can opt for a limited premium paying term, wherein you can avail of a shorter payment duration, say till the age of 50, and opt for a cover till the age of 99. The premiums, in this case, will be higher but guarantee your ability to meet the payments as you will be a working professional who is drawing a regular salary.
2. People are marrying and starting families late
A focus on higher levels of education, managing a competitive work environment, and the need to secure financial independence have pushed the average age of marriage for either gender to past 30, at least in urban India. Consequently, people are choosing to delay parenthood too.
What this means is many are becoming parents in their late thirties or early forties. So, by the time your children finish their education and are of marriageable age, you could be entering your 70s and still taking care of familial responsibilities.
In such a scenario, if something were to happen to you before your children become independent, it would be a major emotional and financial setback to your family. Extending your term cover will ensure that the loss of your contribution to the family does not hamper their financial future.
3. Living expenses are on the rise
Life expectancy for those aged 70 and above has risen by 18%, as per the All-India Senior Citizens' Confederation (AISCCON). This is thanks to the advancement in medical science and improvement in healthcare services. However, the increasing cost of living and escalating healthcare expenses have thrown many a financial plan off-track.
According to a National Sample Survey Organisation (NSSO) report, the cost of hospitalisation in urban India has spiralled by 176% over a 10-year period, from 2004 to 2014! As expenses continue to rise, things will only become more challenging for retirees. To manage expenses, many of us will be obligated to work far beyond the conventional retirement age – or curtail our lifestyle expenditure.
To ensure that an extended hospitalisation does not derail your family’s finances, you need to extend your term cover.
4. It ensures that your legacy lives on
A key reason why many of us work beyond retirement age is to leave behind a financial legacy that ensures a comfortable life for our dependants. Among the many long-term investment options available, a term plan can be construed as a low-cost, tax-free legacy planning investment that pretty much guarantees a fixed corpus to one’s heirs.
Let’s assume you wish to opt for a cover of Rs 1–2 crore. It would be very difficult to meet that kind of financial outlay from a regular income, but a term plan makes it possible for your loved ones to receive a lump-sum, tax-exempt death benefit if you choose to extend your coverage to an age as high as the insurance company allows. Here are some of the factors you should take into consideration that can help you choose the right term for your Term Plan.