30-year Term Insurance: Who Should Buy?

TABLE OF CONTENTS

• What is the policy term, and why is it important?
• How does the policy term affect the term insurance premiums?
• 3 scenarios where a 30-year term plan may be a good fit
• 2 scenarios where a 30-year term plan may not be a good fit
• The bottomline: Is a 30-year term life insurance right for you?

What's the first most important thing you should consider before you buy term insurance? Why, the amount of coverage, of course. This is essentially the sum assured under the plan, and it is the amount that will be paid out to your nominee in case something happens to you when the policy is active.

Okay, so what's the second most important thing you should take into account before buying a term insurance plan? Well, that would be the policy term.

What is the policy term, and why is it important?

In a term insurance plan, the life cover is only valid for a specific period. This is why it is known as term insurance. And the period over which the term insurance coverage is valid is called the policy term. The length of term life insurance coverage varies from one plan to another, and it can be 10, 15, 20, or even 30 years long.

So, why is the policy term important? That's mainly because of two reasons -

1. The benefits are only during the policy term

   The benefits offered by your term insurance plan are only valid during the policy term. So, in case of your demise after the policy term, the insurer will not make any payouts to the nominee, because your policy would have expired. For this reason, the policy term needs to be long enough to protect your loved ones adequately.

2. You need to pay your premiums on time to keep the policy active

   To keep your policy active, you need to pay your term insurance premiums on time. In case of a single premium plan, this is just a one-time payment. But in case of limited premium or regular premium plans, the premium payment term is longer. So, ensure that you are capable of meeting the cost of insurance throughout the policy term, in case of regular premium plans.

How does the policy term affect the term insurance premiums?

The longer the policy term, the more the chances are that the insured incident - which is the policyholder’s demise - will happen. So, the risk for the insurance provider increases as the policy term rises. For this reason, the term insurance premiums also rise as the policy term increases.

This means that the term insurance premium for a 30-year term life insurance plan will be higher than the cost of a 20-year term plan.

So, do you need a 30-year term plan?

For some individuals, a 30-year term insurance plan may be too long. For others, this policy term may be inadequate. Here is a closer look at some scenarios where a 30-year term life insurance plan may be the ideal choice, and some situations where it may not.

3 scenarios where a 30-year term plan may be a good fit

Here are 3 examples when a term plan with a 30-year policy duration makes for a good choice.

If you have a long-term debt

In case you have recently availed a 30-year home loan or any other long-term debt, a term insurance plan with a policy term to match the debt repayment tenure is a good idea. So, in case something untoward happens to you, your family can pay off the debts thanks to the insurance cover.

If you are not retiring any time soon

If you are just in your 20s or 30s, retirement is likely to still be a long way off. So, your term insurance plan needs to be valid long enough to cover your earning years. Here’s where a 30-year term life insurance policy may be a good fit. It can give your family financial protection during your working years, till you retire.

If you want affordable, long-term coverage

Term insurance, being a pure life cover, is the most affordable kind of coverage you can purchase in the insurance market. So, if you are looking for a life insurance plan that gives a significant coverage at pocket-friendly premiums for a long period, a 30-year term insurance plan may be just what you need.

2 scenarios where a 30-year term plan may not be a good fit

There are also some cases where a term plan offering coverage for 30 years may not be the best option. Here are some such examples.

If you have a child with special needs

Children with special needs require financial and emotional protection all their life. So, a term insurance plan with a limited policy term may not be ideal. Instead, a whole life insurance plan may give your child a more comprehensive financial safety net. That way, even in your absence, your child’s future is financially secure.

If you want more than just a life cover

A term insurance plan, being a pure life cover, offers only death benefits. So, in case you want to use your life insurance plan to save for long-term goals, create wealth, or set up a source of retirement income, you need to look at options like savings plans, ULIPs and annuity plans respectively.

The bottomline: Is a 30-year term life insurance right for you?

To sum it up, a 30-year term life insurance plan may be right for you if –

• You are a newlywed without too many dependents
• You have a long-term debt
• You have several years till you retire
• Your spouse is also an earning member in your family
• You want long-term coverage at affordable premiums

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