Unlike whole life insurance, term insurance lasts a certain number of years (usually between 5 and 30 years). So, when you purchase a term insurance policy, it’s important to opt for the right term. Here, we tell you what factors you should take into account when deciding the term of your policy.
- Your mortgage term: The monthly payments toward your mortgage loan likely makes up a significant part of your monthly expenses. Mortgage payments are often the reason why people buy term insurance. So, if you want your policy to cover your home loan, you’ll need to consider how many years of the mortgage term is left and choose your policy term accordingly.
- Dependents: If you have children, you’ll need to consider how many years you’ll need to support them. For instance, if you are buying a policy when your child is 5 years old, it’s likely you’ll want the policy term to last at least until they are 21 years, which would mean opting for a loan term of 15 or 20 years.
- Retirement: Ideally, you should have started saving up for your retirement. So, once your home is fully paid off and your children are financially independent, you won’t need a life insurance cover. If you are still employed, it makes sense to ensure that the policy term lasts until your retirement at least. For instance, if you have another 30 years left to retire, get a 30-year term plan.
Should You Opt for A 30-Year Policy Term?
A 30-year term is an ideal choice for newlyweds, new homeowners, individuals who are the primary breadwinners, and parents of very young children or children with special needs. A longer policy term will just ensure that your dependents have enough funds to meet their financial goals and repay your debts in case of an unfortunate eventuality.
Should You Opt for A 20-Year Policy Term?
A 20-year policy term is a good choice for those who need life insurance coverage, but not for an extended period of time. For instance, if your child has already started schooling or if you intend to retire in the next 20 years, a policy with a slightly shorter term would work well. Also, if the cost is an issue, you may find that a 20-year policy is a better choice since it is more affordable than a 30-year policy.