Simplifying Life Insurance in India
Is it a Good Idea to buy a 10-Year Term Life Insurance Plan?
In the uncertainty of life, we can’t shield our family from every hardship, but we sure can provide them financial protection with an insurance cover.
While buying a term insurance, one of the most important features you need to consider is the policy term. A policy term is essentially the life of the policy, during which it provides you coverage. It must be decided based on your life stage, requirements, financial goals, etc.
It is recommended to have a life cover throughout your life or at least till the time you have financial liabilities and dependents. However, sometimes, you might require a coverage for a short period. For such cases, a 10-year term insurance can be a prudent choice.
Let's consider check out details about the 10-year term plan. What are its benefits, considerations and how important it is for a short-term protection and long-term peace of mind.
What is a 10-Year Term Insurance?
A 10-year term insurance is a term plan with a policy tenure of 10 years. It provides financial coverage for 10 years and is best suited for a short-term financial protection.
During this period of a decade, if the insured person passes away, the policy pays out a death benefit to the beneficiaries. Unlike whole life insurance, it doesn't accumulate cash value and is a pure protection plan that provides just the insurance cover.
Once the tenure is over, the policy expires. It's a straightforward and cost-effective option for those seeking short-term financial protection.
How Does a 10-Year Term Insurance Policy Work?
Like other term insurance policies, the 10-year term insurance provides death coverage but for a predetermined period of 10 years.
Let’s understand this with an example:
Consider Mr. Sujoy has taken a 10-year term plan for himself, with a sum assured of 50 lacs. Mr. Sujay paid his premiums as agreed. Following are the cases that can happen:
Case 1: In the 7th year of the policy, he meets with an unfortunate demise.
In this case, his beneficiary is paid a death benefit of 50 lacs and the policy closes.
Case 2: In a happy case Mr. Sujoy survives the policy term.
In this case, the policy expires after 10 years, and no maturity benefit is paid to the beneficiary.
Why Should You Choose a 10-Year Term Insurance?
1. Affordability
A 10-year term insurance plan, even for higher sum assured, typically offers more affordable premiums compared to longer-term options, since it is for a lower term. This makes it a budget-friendly choice for individuals seeking essential coverage for the required term without a significant financial commitment.2. Short-Term Obligations
A 10-year term insurance is suitable for covering short-term financial obligations, like paying off a mortgage, covering education of children, supporting dependents until they become financially independent. Thus, aligning the coverage period with specific milestones optimises the benefits of the term plan.3. Optimising Risk Mitigation
A well-planned short-term coverage provides protection during critical life stages, thus minimizing financial risks associated with unexpected events during those stages. It ensures that dependents are safeguarded during the most vulnerable periods.4. Premium Stability
Since you have planned the coverage for this period of 10 years, you can buy a level term plan, thus keeping your premiums stable for the tenure. This predictability can be beneficial for budgeting purposes, especially for people who prefer a simple and consistent financial plan.5. Career or Business Focus
A 10-year term plan is suited for those in dynamic careers or entrepreneurs focused on short-to-medium-term business objectives. During their most volatile and aggressive times when the dependencies are most pronounced, they can plan a high coverage to take care of the financial liabilities in case they meet an unfortunate demise.Who Should Consider Buying a 10-year Term Insurance?
1. Those Looking for Temporary Financial Protection
A term plan for 10 years is suitable when there's a need for financial protection for a specific period, such as until a mortgage is paid off or children are financially independent.2. People Looking to Cover Debt Repayment
Consider an individual has taken a home loan of 1 crore and plans to repay it over a period 10 years. He can look for buying a 10-year term plan thus ensuring his debt is covered if something happens to him during this repayment period. Thus, people looking to cover their debts for a certain tenure can opt for 10-year term insurance.3. Business Owners
A 10-year term plan is valuable for business owners who want to provide financial security for their families in case of untimely death, especially during the critical early years of the business when the credits are high.4. People Looking for Supplemental Coverage
10-year term insurance can be added to other insurance policies, like whole life or endowment plans, to enhance overall coverage during certain years of increased liabilities.FAQs About 10-Year Term Plan
Can We Extend the Death Benefit of a 10 Year Term Plan After the Expiry of the Term of 10 years?
What Happens if the Policyholder Passes Away After the Period of 10 Years?
What Happens if I Outlive My 10-Year Term Plan?
Can I Add Riders to My 10-Year Term Plan?
What Does a 10 Year Level Term Insurance Mean?
What is a 10 Year Decreasing Term Insurance?
Other Important Articles Related to Term Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
