What Is A 25-Year Term Life Insurance Policy?
Term insurance has proven to be a popular choice among insurance buyers because of its comprehensive coverage at affordable premiums. These plans offer coverage for a specific term, often ranging from 10 to 40 years.
A 25-year term life insurance policy offers life cover to the policyholder for a period of 25 years from the date of policy issuance. If the life assured were to die during the tenure, his/her assigned nominees shall be entitled to the death benefit amount. This amount acts as a financial safety net for the family members that depended on the deceased policyholder for daily expenses. Please note that insurers only pay out the benefit amount if the death of the life assured occurs within the policy term of 25 years and if all due premiums payments have been made.
Key Features Of 25-Year Term Life Insurance
-
The policyholder can assure a sum to be paid on her/his death by making regular premiums. The sum assured on death is a guaranteed benefit.
-
The premiums paid towards the policy are exempt from taxes under Section 80C of the Income Tax Act, 1961. The proceeds from the policy also enjoy tax benefits under Section 10(10D).
-
On maturity of the policy, the term plan coverage shall lapse immediately.
-
No death claims arising after the policy term of 25 years shall be entertained by the insurance provider.
-
The premiums charged and the sum assured remains constant throughout the policy term of 25 years unless otherwise specified in the policy bond.
-
The death benefit amount shall be payable as a lump sum amount or in installments as monthly income.
-
One can also opt for additional riders with the base plan for extra coverage against accidental death, disability/dismemberment, critical illnesses, etc.
Mostly, a 25-year term policy is bought when the buyer expects a financial need that can be potentially eliminated in a span of 25 years. Such policies can basically mitigate financial risks for the said term and equip beneficiaries to fund their future needs should the primary provider die.
Why Should You Purchase a 25-Year Term Life Insurance Policy?
A 25-year long life insurance coverage is significant, representing a full quarter of a century. An adult witnesses some of the most important milestones of his/her life during this period. It is also during this time frame that one can expect to make financial decisions impacting a large portion of his/her life ahead. It would be quite a rude awakening for your family if it finds itself in a financial fix owing to your decisions.
A 25-year term life insurance policy can offset this risk and enable them to take on whatever financial obligations that you may leave behind. The death benefit proceeds from the plan can help cover your child’s education expenses from school through to college, help your spouse pay off mortgage payments, in addition to other debt obligations. It can also help your spouse live a financially secure retirement after your death, without having to worry about affording housing and medical expenses.
Who Should Buy 25-Year Term Life Insurance?
The following people should definitely consider getting a term policy with 25 years of coverage:
-
A parent to potentially set their child up for financial stability till the child becomes self-sufficient
-
A person with dependent and retired parents who need capital for medical expenses
-
A married individual with a dependent spouse
-
An individual who has taken out a new home loan
-
Individuals with outstanding debt obligations
-
A person nearing 50 years of age with a dependent spouse to look after
-
An individual planning his/her retirement in the next 25 years
The abovementioned list basically describes every individual with a dependent to take care of. If you feel that term coverage against your life can benefit anyone, you should buy it. Leaving your loved ones unequipped to handle financial emergencies in your absence should never be a reality. A kid’s education, a parent’s treatment, your spouse’s independence, everything should be accounted for to ensure comprehensive coverage for a comfortable life.
What Is The Right Coverage For A 25-Year Term Life Insurance Policy?
It is important to establish that there is no standard as to the amount of coverage. Each buyer comes with their own set of requirements, and circumstances that need consideration. A 25-year long term insurance cover should be enough for you to assure a large sum for your family. However, the amount should also be in tandem with your budget. There is no point in buying a policy if you can’t keep up with the regular premium payments required to keep the policy in force for a term of 25 years. Therefore, instead of coming to a random figure, factor in the following:
-
Loss of Income - If you are the sole earning member of your household, it is a definite possibility that they will struggle to replace your income. The amount of coverage, therefore, should reflect your current and future income. Experts suggest it should at least be 10 times your current annual income. That way, your family has enough time to recover from your loss with the death benefit amount.
-
Premium Affordability - People tend to assume that affording premiums for an amount that’s 10 times their current salary can be expensive. However, you should know that premiums for term insurance cost you lower than what you will be charged for a whole life policy. With term insurance, you only have to pay for the duration of the policy (25 years in this case), and there is a lot of flexibility when it comes to premium paying modes and options.
-
Number of Dependents - If you have children, a major chunk of the amount will be spent on their education, which is not getting any cheaper. Estimate the cost of their education, the age they are at, and the number of years remaining for them to complete their education. Extrapolate this amount to the number of children that you have. In addition, consider the needs of your spouse and parents, their medical history to account for their expenses as well.
-
Outstanding Loans - As mentioned earlier, the 25-year term life insurance policy should be able to help your family cover your existing debt obligations. Take into account these expenses, earnings from other assets, and then form a decision. Do not forget to factor in the rate of inflation while you are at it.
FAQ's
-
What is the cost of 25-year term life insurance policies?
The premiums charged for a 25-year term life insurance policy depend on the sum assured, the policyholder’s age, annual income, medical history. Health is one of the major criteria to decide the premiums, which is why premiums tend to increase with age. It will also be higher for smokers and those with a history of medical illnesses, considering that the insurance risk is more in the case of these individuals.
-
How to reduce premiums for my 25-year term life insurance policy?
Once the premiums are set, they can’t be changed till the expiry of the policy. However, if you are yet to buy a plan, the easiest way to reduce premiums will be to stop smoking/tobacco. Individuals who smoke are charged nearly double the premiums than their counterparts. Another good idea would be to purchase a plan as soon as possible. The longer you wait, the more will be the premiums. Further, some insurers also offer rebates on the premium amount if you assure a higher sum.
-
Does the premium for a 25-year term life insurance policy increase every year?
If you have bought a level 25-year term life insurance policy, your premiums and the sum assured remain constant throughout the policy tenure. If you have chosen an increasing term plan, then the premiums increase along with the sum assured.
-
Are medical tests mandatory to purchase 25-year term life insurance?
Yes, most insurers would request medical checkups prior to policy issuance to assess the risks associated with the buyer. These are mostly standard procedures for young buyers. People above the age of 50 may need to undergo specialized tests depending on their medical history.
