How to Choose the Right Policy Tenure for Term Insurance?
Term insurance is a type of life insurance policy that is preferred over other insurance policies since it offers a life cover at an affordable premium amount. This makes it the cheapest yet convenient type of life insurance plan.
When buying a term policy, you will need to decide the policy length of your insurance policy. Well, term life insurance policy generally comes in increments of 10, 15, 20 or 30 years in the UAE. But how long should your term insurance policy be? If you choose too short policy tenure, it might not solve the purpose of buying a term plan. And if you choose too long policy tenure, then you will end up paying more premiums than you actually should. Thus, the policy tenure of a term plan differs for each of us since everyone’s needs are different from each other.
So before choosing the plan tenure, you should ask yourself:
- How long will it take for my family to deal with financial difficulties?
- What financial issues will my family members have to confront on their own if I am no longer alive?
While choosing the policy tenure for term insurance, keep these questions in your mind and consider the following:
You might have certain liabilities such as loans and mortgages which you need to repay over a period of time. So, if you don’t want to leave the burden of repaying the outstanding debt on the shoulder of your loved ones then you should choose the policy tenure accordingly. For instance, if your home loan will take 10 years to be paid off then your plan tenure must last at least 10 years. This will eventually help the beneficiary to clear off the outstanding debt even after your death in a stress-free manner.
Dependents & Commitments
If your dependents have certain years before being financially independent, that particular duration can be the length of your term. Events like a wedding of your child or a settled career should be considered within the term length so that your dependents can easily deal with financial uncertainties.
The lump sum amount that the insurance company pays to the beneficiary as a death benefit after the untimely demise of the policyholder is meant to provide financial security to them during such hard times. So, it is up to you to decide if the amount of the sum assured should enough for many years or just support your dependents until they will get back on their feet.
You might think that long policy tenure is the right one for you since it might cover your needs. But note that long term policy tenures are expensive when compared to the short term policy tenures. So, apart from considering your needs and responsibilities, make sure you consider your affordability too. Will you be able to pay high premiums? If you think that the high premiums might disturb your budget then it is ideal to drop a few years from the policy tenure of a term insurance policy and opt for the one that suits your need as well as budget.
The Final Words
To determine the right policy tenure of your term insurance, you just need to consider the main reason you are purchasing this policy. Keep this thing in mind that you are buying a term plan to secure your loved ones financially if something happens to you and to ensure that your untimely demise will not increase the financial burden of surviving members. So, choose the policy tenure wisely that suits your needs and budget.