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Different Types of Time Limit Plans in Term Insurance

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Over the past few years, insurers have aggressively pitched for selling term life insurance plans. You shouldn’t be surprised if you see ads that let you buy term plans for less than Rs.20 per day. There is no doubt that less than Rs.20 per day sounds incredibly affordable. But you shouldn’t buy a term plan just for that. Here are some reasons why a term life insurance plan should be in your investment portfolio.

  • Financial Support

You should have a term insurance in your portfolio but it is definitely not for pure investment purposes. This means, that unlike other insurance plans, a term plan does not have a savings or investment component attached to it. Your entire premium is invested towards securing the highest possible sum assured for your life. If a policy holder passes away during the term of the policy, the nominees will receive the proceeds of the fund.

  • Flexibility

We already know that term insurances are light on your pocket. Apart from being easily affordable, they are very flexible as well. When you opt to buy a term insurance plan, you can choose the term of the plan, the sum assured amount, the frequency of paying the insurance premiums, riders for your policy and so on.

A policy holder has the upper hand when it comes to choosing the term of a term plan. This number largely depends on your insurer and can vary by a substantial margin. While some insurers let you choose a plan for 10 years or 35 years others can let you do the same between 5 years and 40 years. Based on your requirements and needs you can and should choose the time limit of your plans.

5-10 Year Plan

Few of the insurers let you purchase a term insurance for 5-10 years. This time frame is ideal for someone late in their professional career and close to retirement. For an instance, if you are in your late 40s or early 50s, this type of term plan can be beneficial. This is also the time, where one might have most of their responsibilities at their peak such as children’s education, home loan, maybe a car loan etc.

20-30 Year Plan

Though there is no harm in having a term policy that extends beyond your retirement, it doesn’t make a very strong case for itself. A term plan with a duration of 2-30 years is ideal for people somewhere in the middle of their career. This puts them in that sweet spot of reasonable premiums and coverage. If you are in your mid to late 30s, this time frame will help you sail across your retirement age.

35+ Year Plan

A longer duration term plan fits in perfectly for people very early in their careers. Since they buy the plans much earlier, they end up paying lower premiums for the same. This provides them with a lot of flexibility as well. Since a person would have bought the policy relatively earlier, they can foresee and tweak the policy or sum assured with time to stay ahead. 

What Factors Affect the Time Period of Term Insurance Plans?

A factor that impacts the time period of term insurance plans is:

  • Age

It is the most obvious parameter that affects term plans duration. For someone who is in their 20s, they will be able to secure a plan that spans over 35 years. Also, one needs to consider the entry and maximum age that a term plan supports. The entry age for almost all of the term insurance plans is at 18 years, while the maximum entry age varies based on your insurer.

Consider this, an insurer has an age limit of 18 to 65 years and you are in your mid 20s now. You easily opt for a 35 year term plan. However, if you are in your early 40s, the insurer will not allow you to buy a 35 year term plan.

What Role Do Statutory Laws Play In Term Insurance Plans

The IRDAI or the Insurance Regulatory and Development Authority of India is responsible for creating and mandating different laws for term life insurance plans or any insurance plans for that matter. It works towards the interest of the policy holders and any discrepancies that might arise during the term plan. One simple example of the same would be, the IRDAI mandates that insurers cannot reject claims based on non-disclosure of facts if the policy has been active for at least 2 years.

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