With the uncertainty of life, every individual should invest in a life insurance term policy that can ensure the protection and wellbeing of his/her family in case of a misfortune. A term plan will act as a financial sentinel to your family and enable them to stand the test of dynamic economic scenarios. The most common question every individual asks is the perfect term plan duration suitable to his/her needs.
Today, we will share some important factors that you should consider while determining the duration of your policy.
Term Policy: Important Questions to Ask Yourself.
Some of the critical questions that you should ask yourself before deciding on the term plan duration include:
- The amount needed to cover your outstanding liabilities easily?
- What are the financial difficulties that can arise in the future?
- Will the amount left after paying the liabilities enough for the wellbeing of your family?
- What are the lump sum amounts that your family can need in the future?
Term plan duration: Some Important Factors to Consider
Liability: You should make a list of your financial liabilities and decide your term accordingly. For example, if you have an outstanding loan for a period of 25 years, then your term duration should be 25 years.
Affordability: You must consider your financial situation before opting for an expensive plan. Term plans with longer duration are quite expensive and can affect your finances, so make sure that you choose a term plan in sync with your earnings.
Length of Support: The profile of your family is a great factor while determining the term plan duration. If your child is six years old and you want to provide cover until his/her education, then the duration can be 20 years. In case you want to extend the support until the child’s marriage, you will have to extend the term plan.
Debt: Have you accumulated a large amount of debt and are now worried about how your family will pay in case of your untimely demise? In this case, you need to take term insurance that can cover the period of liability, keeping the burden upon your family at bay.
It can be catastrophic for your family if they find themselves in debt when you are not around. Make sure that you keep the outstanding debt into consideration while calculating the Term Policy duration.
One of the most important factors that you need to consider with a term plan policy is your current age. Insurance policies come with different terms of 15 years, 20 years, 25 years, and 30 years. You have to make sure that your plan syncs with the time of your retirement. If you are 25 now and plan to work for 30 years, more than your term should be 30 years. If you choose a plan for 15 years, you will remain uncovered for the next 15 years.
We suggest that you take a longer-term plan at a young age.
You can rely on these factors while calculating the term plan duration of your insurance policy. Each of these factors must be taken into consideration for smooth financial planning.