The best way one can determine the tenure of one's life insurance policy is by determining the duration of one's financial obligations.
Just like you, hundreds of investors ask this question on a daily basis: How long the policy should last? While buying a life insurance policy an individual considers a plethora of factors, but being the only breadwinner in the family, you have two main decisions- How much coverage to buy and the tenure of your policy. However, knowing the actual tenure of term plan is as important as deciding the amount of cover you need.
The best way one can determine the tenure of one’s life insurance policy is by determining the duration of one’s financial obligations. For many, most of the loan repayment is up to the duration of their employment tenure. In case you are in the retirement bracket of 60 years, it is likely that your children are not settled. Particularly, in cases where children are taking more time to settle in comparison to before. Thus, any misfortune or any unfortunate incident can set your family back. In such scenarios, anyone would want that their policy continues until their last major obligation is taken care of.
Your EMIs are yours, let their status not affect your family
A lot of people wonder what happens to the outstanding obligations they had once they die. Do those debts simply disappear? Or your family will be on the hook for your debt?
Your debts become the responsibility of your estate when you die. To avoid putting your family in such a scenario, ensure that you have sufficient insurance coverage. The first thing you can do is write down your financial commitments. It can include all, from covering your child’s education to his/her marriage to your personal loans. Secondly, measure the time-frame you will be required to make this ends meet. In all likelihood your EMIs are for the duration of your employment; so liabilities do exist until your retirement age. Term life insurance can replace your earned income until your family has saved enough which can help them in repayment of your loans. So choose your life insurance term length based on how much debt you wish to cover.
Salaried Class is the most affected in the absence of the primary bread winner
You will never face the biggest consequence of not having life insurance, but your loved ones will, specially the salaried class families who are entirely dependent on one source of income. Primary breadwinners may also want to consider at least 30-40-year policy tenure. Because if your family relies on your income for their financial stability, you’ll probably want a term length that lasts him/her to near or at retirement. The proceeds of life insurance can help your family to retain their existing lifestyle.
How long until children are on their own
Every parent dream is to send their children to one of the top institutes in the country so that they can have a bright future ahead. Irrespective of the fees and expenses, any parent will do everything to ensure a bright future for their child. But, have you ever thought how insecure your child’s future may become if you are no more there to fund his/her education? The best solution to this is again life insurance that will take care of all the financial needs even when you are not around.
Traditionally, people used to get married by 22-23 and have kids by the age of 25-28. This means by 60 or even before, you have fulfilled all the responsibilities as a parent and your children are not dependent on you financially. However, nowadays one of the popular demographics shift is that more and more people delay getting married and at the same time, couples also delay starting a family. So, by the time you turn 50, there are higher chances that your kids are mostly still studying and may require your financial assistance. Hence, it is a wise decision to buy term insurance at least till the age of 60, i.e. your retirement age or even more than that.
(By Santosh Agarwal, Chief Business Officer-Life Insurance, Policybazaar.com)