When purchasing a life insurance policy, think about how long it will take to accomplish all of your primary financial goals. When purchasing life insurance, connect the policy term with your financial objectives, such as your child’s schooling and retirement planning, as overestimating the duration may result in greater premium payouts. Continue reading to learn how you can determine the best tenure for your life insurance policy in order to build a robust corpus. Ramesh Kumar, a 48-year-old Registrar and father of a five -year-old, is reevaluating his life insurance needs due to increased financial commitments.
A term insurance salesman has recommended a plan that provides coverage for up to 80 years, while other alternatives range from 50-51 to 70 years. Concerned about longevity and the increased expense of taking out a policy later, he wonders if choosing for the longest feasible term is the correct choice.
Ramesh Kumar wants to make the most out of his life insurance policy and believes that the longest duration (80 years) affords him that. However, the solution to his difficulty comes in recognizing the objective of life insurance: to provide financial assistance to his dependents in his absence.
Will his family still require financial help at that age?
Wouldn’t he have already accomplished his primary financial goals, such as his child’s school, marriage, and housing, while creating a sizable retirement fund to support himself and his wife?
The length of Ramesh Kumar’s term plan should be determined by how long he anticipates needing to reach his main financial objectives.
He needs a term plan for the same amount of time if he can accomplish this in ten years. Kumar needs to understand that the family will eventually become less reliant on him or financially independent.
So why is he required to pay a greater premium for a longer period of time? He will want a larger sum insured (accounting for inflation) the longer the policy’s duration. A larger premium would result from each of these causes.
Taking the longest possible time is not advised. Kumar should instead concentrate on his retirement planning because he and his spouse would require a sizable corpus at this later stage of life. He needs to save as much as possible in order to accumulate a retirement fund. As a result, he needs to think carefully about when he will no longer have financial dependents, and his term insurance should last until then.
At the same time, he needs to make sure that by the time he retires from a financially active life, he has a healthy corpus for pension.
