How to Determine the Ideal Term Insurance Period for Yourself?

Term Insurance Period

Unlike whole-life insurance policies, term insurance offers coverage for a pre-decided period or ‘term’ only. Therefore, the biggest challenge with buying such type of insurance plan is to decide how long should the insurance term be?

Not all policyholders lead the same lifestyle, are of the same age, earn the same income or have the same financial responsibilities and liabilities. Thus, they pursue different term insurance benefits from their policies. To enjoy these different benefits, naturally, the term period for different policyholders will vary. What works for one, may not work for another.

So how does one determine, what is the ideal term period? To help make your decision simple, below listed are 3 parameters that you can consider while determining the ideal term insurance period for you-

  • Age

Age is a primary parameter that comes into the picture while determining your insurance term. Lesser the age, lesser will be the premium amount. Thus, if you are young and have many working years ahead of you, you can opt for a longer tenure. However, if you are nearing retirement and thinking about buying a term insurance, you can opt for a shorter duration.

  • Sum Assured

Sum Assured is the money promised to a nominee in case of the untimely death of the policyholder. Depending on how much sum assured you want to commit, your term insurance premium will differ, further affecting your insurance tenure.

  • Lifestyle and Payouts

Your lifestyle and the pay-out type that you decide to opt influences your term period. People with an unhealthy lifestyle, such as those with alcohol or tobacco addiction, or with any familial history of hereditary conditions are generally not granted a long period on their term insurance.

Taking the above-mentioned factors into consideration, below listed is the ideal term insurance period according to what life stage you are at-

In 20s – 20s is essentially the best time to buy term insurance. People in their 20s are generally in their prime of health and can get a long-term insurance plan (35-40 years) at low premium costs.

In 30s – People in their 30s are more engrossed in familial responsibilities such as children’s education, paying debts of home or car loans, or handling increasing work responsibilities. However, their financial condition is considerably better in the 30s than what it was in their 20s. Therefore, people in their 30s can easily opt for a tenure of 30-35 years for their term insurance.

In 40s – By the time people get to their 40s, the burden of their familial responsibilities has reduced considerably while there is a lot of stability in their career. Thus, they can easily afford a high premium for a long-term insurance period. Therefore, people in their 40s mostly opt for an insurance term of 25-30 years.

After 50s – After the 50s, people are more prone to certain diseases and medical conditions. As a result, insurance providers do not generally offer a long duration on their term insurance plans. People in their 50s can buy an online term policy for a period of 15-20 years. As their age keeps increasing further, this duration reduces.

Generally, most term insurance providers allow 65 years to be the maximum age for insurance maturity. You can use this age as a benchmark to determine how much time you have until your retirement and decide on your term insurance period.

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