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10 Year Term Life Insurance

TeamAckoNov 2, 2023

Insurance is like a friend in need that comes in handy during difficult times. Insurance offers the much-required financial security that ensures peace of mind. One such insurance is the 10-Year Term Insurance. If you're new to 10-Year Term Insurance, don't worry. We shall discuss everything about 10-Year Term Insurance in this article. By looking at its advantages and disadvantages, you can be sure whether 10-Year Term Insurance is right for you.

Contents

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What is 10-Year Term Insurance?

As the name suggests, a 10-Year Term Insurance is a Life Insurance policy that provides coverage for a fixed period of 10 years. Unfortunately, if the policyholder passes away within this term, the beneficiaries receive a fixed lump sum, known as the death benefit. However, once the policy's term period ends and the policyholder survives, the policy expires, and no benefits are provided.

What is Term Insurance is and how it works

Term insurance offers coverage for a specific period known as "term." If the policyholder meets an untimely death during this period, their family receives the death benefit. Generally, a term can vary in length. In a 10-Year Term Insurance, the term period is 10 years. During this period, the policyholder must pay a recurring premium to the insurance company. The premium rate depends on the kind of policy, the health of the policyholder, and several other factors. Unlike Whole Life Insurance, Term Insurance has no accumulated cash value, making it a more affordable option for many people.

Importance of having insurance coverage

Having solid insurance coverage is essential in today's unpredictable world. The sedentary lifestyle has majorly deteriorated the health of people around the world. As a result, untimely death has become more common. The victim's family suffers emotional and financial losses in such unfortunate events. Although the emotional loss is irrecoverable, the financial loss can be recovered through Term Life Insurance. It can help the policyholder's family avoid a financial setback in times of crisis by using the lump sum of the policy. It ensures the family's lifestyle can continue the same way even after losing their primary breadwinner.

Advantages and disadvantages of 10-Year Term Insurance

Following are the advantages and disadvantages of a term plan.

ADVANTAGES

DISADVANTAGES

Shorter-term Life Insurance plans have more affordable premiums. Resultantly, the premium rates of a 10-Year Term Insurance are much cheaper when compared to its counterparts.  

A 10-Year Term Insurance policy provides coverage for a relatively short period. Hence, the policyholder's family is covered only for the short term.   

This policy allows the insured to reassess their coverage needs at the end of the term. When the term ends, the insured can extend it based on their circumstances.  

Unlike Whole Life Insurance, Term Insurance has no other benefit besides death. If the policyholder outlives the term, they get no cash value. 

Term Insurance is relatively straightforward, with fewer complexities than Whole Life Insurance policies.

If the policyholder wishes to renew the term, the premium rates are reassessed and incremented. Factors such as increased age and inflation result in increased premium rates.

Who should consider 10-Year Term Insurance?

Individuals who may benefit from a 10-Year Term Insurance policy may include the following.

  • Those with short-term financial obligations, such as paying debts.

  • Individuals who may undergo significant life changes within the next decade. It includes transition in the phase of life, from being a bachelor to getting married or from work life to retirement.

  • People who are unsure of the coverage they require can buy this plan. Since 10-year Term Life Insurance offers flexibility, the policyholder can take time to seek clarity on whether or not to extend the term in the future.

  • Individuals nearing retirement who want to provide financial protection to their loved ones for a specific period after their retirement.

Also read: Retirement Plan in Life Insurance

Factors to consider while choosing a suitable term

Since several term life insurance policies exist, selecting a suitable term period could be challenging. Here are some factors to consider.

  • Financial commitments: Closely evaluate the financial obligations you have currently and might have in the near future. It could include expenses on dependents (children and ageing parents), paying off debts, etc.

  • Age and health: Your age and health status are other critical factors while selecting a suitable term. A longer term would be a fitting choice for young and healthy individuals.

  • Budget: Choose a term life insurance policy that has affordable premiums. Since the expense on premiums is recurring, you must set aside the sum of money to pay the premium. Select a policy so the premium rate isn't too heavy on your pocket.

  • Future life changes: With changing life stages, your financial obligations might increase. You might need to pay children's school fees once you start a family. Hence, accommodate your near future life stage in the term life insurance.

How to choose the best 10-Year Term Insurance Policy

Here are some tips to buy the best Term plan for the protection of your loved ones.

Assess your needs

Determine the coverage required to protect your loved ones. You might need higher coverage if you're the family's sole breadwinner and have many dependents. Select a plan capable enough to secure your family in your absence financially.

Compare plans from different insurers

The insurance market is filled with many companies. Each company offers a variety of plans at varying premium rates. Research and compare other companies and select the one most appeals to you.

Examine the policy features

Look for features that meet your needs, such as critical illness or disability riders, premium waiver benefits, or the possibility of converting a term insurance to a whole life policy.

Compare premiums of different plans

Get estimates from several insurers and compare the costs to verify where you're getting the best deal. In addition to the premium cost, consider the insurer's financial strength, customer service, and IRDA claim settlement ratio.

Factors that affect the cost of 10-Year Term Insurance in India

The cost of 10-Year Term Insurance can vary depending on several factors. Here are a few examples.

  • Age: Premiums are heavily dependent on the age of the buyer. Older people are at a higher mortality risk and hence have higher premiums. 

  • Gender: Women generally pay lower premiums when compared to men, as they tend to have longer life expectancies.

  • Health: Healthier individuals have more economical premiums than unhealthier ones. Smokers, drinkers, or those with high-risk jobs generally need to pay higher premiums.

  • Coverage amount: The higher the death benefit, the higher the premium.

Real-Life Example of a 10-Year Term Plan

Consider a 35-year-old non-smoker male looking to purchase a 10-Year Term Insurance policy with a coverage amount of INR 1 crore. After comparing quotes from multiple insurers, he finds a policy with an annual premium of INR 6,000. This policy provides financial protection to his family in case of his untimely demise during the 10-year term. If he survives the term, the policy will expire, and he can reassess his insurance needs and purchase a new policy if necessary.

Frequently Asked Questions (FAQs)

Below are the answers to the given questions regarding 10-year term life insurance.

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Can I renew my 10-Year Term Insurance policy after it expires?

Yes, most insurers allow policyholders to renew their term insurance policies at the end of the term. Remember that premiums may increase, so selecting a suitable term while buying the insurance is much more economical than extending it later. 

Is 10-Year Term Insurance suitable for everyone?

No, the suitability of a 10-Year Term Insurance policy depends on several factors such as financial commitments, life stage, age, and health. Please assess your needs to see if it is suitable to you.

Can I convert my 10-Year Term Insurance policy to a Whole Life policy?

Yes, some insurers offer the option of converting term insurance to a Whole Life plan without undergoing additional medical underwriting. This feature can benefit individuals who want to extend their coverage beyond the initial term and accumulate cash value.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.

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