Term Life Insurance: When should one take a term insurance plan and for how long? It is very important to choose the right timing and period while taking a term plan.
Term Insurance Plan: Term insurance is a means of life security that provides only insurance protection without any investment or savings. It is a simple and effective plan that provides financial security to your family in your absence. But now the question is not just about taking insurance, but about thinking when should one take term insurance and for how long? Choosing the right timing and period makes this insurance really beneficial.
What is the true meaning of term insurance?
Financial planners are unanimous that the purpose of term insurance is not to provide lifelong protection. Its main purpose is to become an income alternative for you – especially when the family depends on your earnings. That is, if you die prematurely, this policy provides financial assistance to your family for home loan, EMI, children’s education or daily expenses.
The period from 25 to 60 or 70 years of age is generally considered the active income period. At this time, responsibilities are more and the main source of income is your earnings. Taking a term plan for this time is most beneficial.
When does a term plan become less important?
After the age of 60 or 70, the need for term insurance often reduces. There are some major reasons behind this:
- Home loan or other debts are usually repaid
- Children become financially independent
- Retirement corpus is ready
- Expense planning becomes stable
At such a time, it is more important to focus on retirement income, healthcare and wealth preservation instead of a term plan. Also, the insurance premium increases significantly with age, which can be costly.
There is no one-size-fits-all formula
However, it is also true that every individual’s needs are different. Some people, such as self-employed professionals, continue to earn even after 60. Some people have family responsibilities at a late age, such as elderly parents or young children. In such a situation, coverage up to 70 years or even beyond may be necessary for them. Therefore, the decision to buy insurance should be based on your personal financial responsibilities and lifestage, and not as per any fixed rule.
Now insurance does not mean just coverage
Now insurance does not mean just coverage, it also means planning. The insurance industry is also now understanding this changing thinking. Amit Dave, Chief Distribution Officer (Proprietary Business), Tata AIA Life Insurance, says, “Today’s customer has become more savvy about term insurance. He is now asking not only about coverage, but also when and why it should be taken. This shows that people have now become more aware about protection and financial planning.” He further said, “Now people are looking at their term plan in relation to their financial needs and different stages of life – like loan cover, children’s education or mental peace during peak earning time. The role of insurance companies is now not only to provide products, but also to empower the consumer by giving correct information.”
Timing is important for term insurance
Term insurance is not a lifelong security cover. It is a financial tool that has maximum value only when you choose it at the right time and for the right period. If you plan for it by understanding your life responsibilities and financial situation, then this plan can give you and your family real security – today and tomorrow.
