What is the first thing that comes to your mind when you think of choosing a term policy period? Is it a number that represents your age or retirement goals?
Selecting a suitable policy period can be tricky. Too long, and it increases the premium payable. Whereas, a short period does no good, given the average age of individuals in India. Like various other critical decisions in life that are not easy, policy period selection for an online term plan isn’t either. This is why many people choose a random number of 20, 30, or 40 years as the policy period. It happens because of the lack of awareness about the impact of this period on the premium and life.
When it is about buying the best online term insurance, you should know that your decision will have a lasting difference in your loved ones’ lives. Let’s start with the importance of selecting a policy period.
Why Should You Think Twice Before Selecting Term Policy Period?
To reach the right answer, you need to first understand why buying an online term plan is important for all. You need this type of life insurance to plan for securing your family’s lifestyle in your absence, till the time your loved ones become financially independent at least. It means they would be able to pay for the household bills, loan EMIs, and other expenses without facing any problem.
The policy period of an online term plan should be long enough to cover your life until your dependents can stand the tests of time after you. Furthermore, a policy period that is good for someone else may not be equally suitable for you.
Let’s dive into a bit more detail to help you understand how to select an online-term plan’s policy period.
More About Term Policy Period Selection
Most life insurance companies provide life cover under online term plans till the age of 75 or 80. This age limit may vary from one company to another, depending on your current age. In general, the period varies from 10 to 45 years. Although the selection of this period is in your hands, you must know the overall impact of different policy periods.
Here’s what matters when you select the policy period for online term insurance:
Age
There is a difference between selecting a policy period as you want and facing limits to this selection. Age is the parameter that determines these limits. For example, if your current age is 25, you can easily buy an online term plan with a term of 45 years, irrespective of the insurer. But if you have already crossed the age of 45 (say), you might not get a premium quote for the same plan for the next 45 years.
The right time to buy an online term plan is when you are young, in your 20s. Not only can you select a longer policy period but also enjoy life cover at a lower premium.
- Sum Assured
Both sum assured and policy period of an online term plan ultimately determines the premium payable. Let’ say you get a quote for a life cover of Rs. 1 crore for 30 years under online term insurance at a premium of Rs. 20,000 per year. If your current financial position does not allow you to pay this much premium, you have two choices – either to opt for a lower sum assured or increase the policy period for a reduced premium.
The former option is suitable if your family’s financial needs can be accommodated in a lower life cover. Otherwise, extending the policy period is advisable to get adequate insurance coverage at a premium that fits into your budget quite easily.
- Individual Preference
Despite having all the required information about online term plan selection, personal preference does have a say in the final decision. If you are more convinced with the benefits of term plan with return of premium, buying a pure term plan may not make a lot of sense to you. Similarly, if your goal is to invest money and get a life cover, you would choose ULIPs over the term plan.
Irrespective of the choice you make, the term policy period is still an important aspect to consider. Its selection requires a multifaceted approach in terms of age, income, and preferred life cover. In case you have doubts about the same, you can easily find a plethora of resources to understand how the online term plan works.
Here are some questions you must ask yourself before you opt for a specific policy period for an online term plan:
- At what age do you wish to retire?
- How many dependents are there in your family?
- Do you have a working spouse?
- What are your current financial liabilities?
- How much time do your dependents need to start earning or become financially independent?
