25-Year Term Life Insurance - Is it Right for You?

25-Year Term Life Insurance - Is it Right for You?

What would you think if we told you that a band-aid and term insurance work the same way? We know it sounds bizarre, but stay with us here: Both intend to make a worse situation better in their own way. The need and requirement seem only temporary, though significant. You hope and wish that you never have to use it! Life can put you in circumstances where the need for both becomes crucial. While a band-aid can heal your wound, a term life insurance policy can financially compensate your family for your loss. When you set out to buy term insurance policy, you can customise its policy term, i.e., the number of years you want the policy to be active for. This depends on your future financial goals, unpaid loans/liabilities, how long it’ll take your family to be financially independent, and other factors. In this article, we’ll discuss what happens if you choose a policy term of 25 years, how much it costs, and whether it’s the right choice for you. Let’s go!

What is Term Insurance?

Term insurance is a contract between you and the insurer to provide your family with a sum assured, in case you pass away during the policy term. For the policy to stay active, you make timely premium payments. It ensures a financial safety cushion for your family members and ensures that they don’t compromise on their financial goals and lifestyle. Let us now know more about a 25-year term life insurance policy.

What is 25-Year Term Life Insurance?

As the name implies, a 25-year term life insurance policy provides life cover for a period of 25 years. The policy will protect your family against unfortunate circumstances by providing them with a death benefit, i.e., a sum of money if you pass away during the policy term. This money can be used to meet their financial obligations and spend on their future needs. For example, Daman is a 27-year-old IT employee who stays with his dependent spouse and son. He bought a new house by securing a housing loan and wishes to put his son into a prestigious university for his higher education. Daman buys a term insurance policy with a duration of 25 years and a sum assured of Rs. 50 lakhs and nominates his wife as the nominee. If in case Daman passes away during the policy term, his wife will receive a death benefit of Rs. 50 lakhs. She can use this money to pay off the housing loan and send her son for higher education to fulfil Daman’s dreams.

How Does a 25-Year Term Life Insurance Policy Work?

It works similarly to any other term insurance policy. It will offer coverage for a duration of 25 years. You can customise the sum assured, add riders, and other benefits to suit your and your family’s needs. The only thing you need to be cautious of is making timely premium payments to continue coverage. You can choose to pay the premiums in either of the following ways:
👉Regular Pay – You can pay the premiums on a regular basis until the end of the policy term.
👉Limited Pay – You can pay the premiums for a limited period of the policy term and enjoy the benefits until the end of the policy term.
👉Single Pay – You can pay the premiums for the entire policy term as a lump sum amount in one single shot at the time of purchasing the policy.
Whatever the mode of premium payment, you will have to make them on time for your 25-year term life insurance to be active. This will ensure that your family will receive a death benefit if you pass away during the policy term. However, if you outlive the policy term of 25 years, you will not be eligible to receive anything.

Let us understand this better with an example:

Elvin, 30 buys a term insurance policy for a period of 25 years, and with a sum assured of Rs. 75 lakhs. He dreams about hosting a gala wedding for his daughter in a few years. And, he nominates his wife as the nominee of the policy. Now, let us see how the 25-year term insurance policy works –

• The insurance company will pay the insurance proceeds to Elvin’s wife with a sum assured of Rs. 75 lakhs in case he passes away while the policy is active, after which the policy will terminate. This will help her use the finances for her daughter’s wedding and other regular expenses.
• If Elvin survives the policy term, the insurance company will not pay him anything and the policy will terminate.

25-Year Term Life Insurance: Is It Right for You?

When you buy a 25-year term life insurance policy, you get a life cover for a quarter of a century. That might be a decent time period to finish up all financial obligations and ensure that you are free from responsibilities. Let us understand this better –
👉Suppose you buy a 25-year term insurance policy for your financially dependent kids; your term life insurance will be active until your kids graduate from college and start earning for themselves.
👉Suppose you buy your first home on loan that needs to be settled over a period of 25 years - and you invest in a 25-year term insurance policy. The policy will ensure that your family can continue to make loan payments even in the worst-case scenario.
You can consider investing in the policy if – You have dependent children whom you expect to become independent over a period of 25 years and stand on their own feet. This policy will last until they are financially dependent on you. However, if you are a parent of a child with special needs, then you might want a more extended cover. 25-year term insurance will stop coverage after 25 years, your special child might lose financial safety after the policy expires. You are middle-aged and looking for a plan that covers until you retire. You want the term insurance to replace your earnings while you're working and plan to retire after 25 years. In such cases, 25-year term insurance is one of the most cost-efficient options you can choose. You have long-term financial liabilities like housing or educational loans for several years and you expect to pay them off before the policy ends. You can opt for this policy of 25 years when you worry that your family will have to go through the burden of repayment if something unfortunate happens to you mid-term.

To Conclude,

We have come to the end of this article. We hope that you gained enough insights on whether a 25-year term life insurance would suit your and your family’s needs. Think about your requirements and choose a plan that best suits them.