Should You Buy Term Insurance Plans Offering 99 Years Of Coverage?

Term insurance plans provide financial coverage to your family in case of your unfortunate death if it happens within the policy tenure. Amidst selecting the plan, one important aspect we often overlook is what should be the ideal tenure since the death benefit will be paid out to the family if the policyholder passes away during the policy tenure. The simplest approach to think about this is to ask yourself: how long will your dependents be financially "dependent" on your income?

If you expect they will remain dependent until you are 60, you will need a term plan that covers you until then. If the answer is 70, the tenure will adjust appropriately. Some people have a hard time pinpointing the age and time and thus, select the 99 years policy term. However, is it a safe option or could it cause you to shell out extra money than needed? In this article, we will be discussing the same.

Term insurance plans that offer 99 years of coverage: Do we actually need them?

When selecting a term insurance policy, you must indicate the appropriate coverage age. Some insurers give plans that last up to 99 years, known as whole life insurance. Insurance companies frequently recommend that you purchase whole life insurance because that is when they will make the most the larger the premium, the higher their commission. However, there is a catch in it that you should understand. Financial experts seem to agree on this- the tenure of your plan must be solely determined by your dependents.

Here are a few cases that demonstrate the same:

CASE 1: Nikita is a 30-year-old, married mother of two (4 and 5 years).

Shreya is in her thirties and has children under the age of five. Should she get a term coverage that covers her until she is 99 years old?

Suppose Policy tenure is 69 years (because Shreya is now 30). After sixty years, her children are 64 and 65 years old. When her children reach their sixties, the requirement for 1 crore term insurance as an income replacement will be less. It is more possible for the children to help their ageing mother financially. Even if she dies at 80, the value of a Rs 1 crore term cover beyond 50 years is doubtful. Plans with 99-year terms do not make much sense here. Instead, the optimal tenure she can opt for here is 30–35 years at most.

CASE 2: Natasha is a 30-year-old married without children.

If she is a working woman who works, has a husband, and has no intentions for children, a term insurance policy whether it is for 1 crore term insurance or 50 lakhs makes little sense. Instead, she should prioritise savings, mutual fund/stock investments, and estate preparation. In case she wants to have children, a term insurance policy that lasts until the child reaches the age of 35 to 40 years should be sufficient.

Things to remember if you plan to acquire whole life insurance plans that provide 99 years of coverage".

1.When you are 60+, it is your children who support you, not the other way around: When you reach 60 and surpass your retirement age, your chances of having dependents reduce considerably. Without dependents, the necessity for your term insurance coverage decreases. Typically, your children, now ex-dependents, provide financial support for you. Even if you want to be financially independent, your savings may be a better option for supporting yourself and your spouse.

2. Your premiums from later years could have been put to better use: The low premiums for term insurance is a major selling point. For example, a 30-year-old non-smoker would pay approximately Rs 10,000 for a Rs 1 crore coverage. However, this plan can be used as a substitute during your working years. After retirement, putting the same premium to better use—such as savings, real estate, estate planning, mutual funds, stocks, or business—becomes more beneficial.

3. After 30-40 years, your corpus will be worth very little due to inflammation: People frequently assume that purchasing a 1 crore term insurance policy with coverage until age 99 permits them to leave a "legacy" for their children, even if the funds aren't required for financial survival. Given the RBI's prediction of 5.4 per cent headline inflation in 2023-24, the true worth of Rs 1 crore coverage for dependents after 50 years may not be a meaningful "legacy."

How Do You Determine the Duration of Your Term Insurance Policy?

Term insurance policies are a type of financial security that only matches some people's needs. The plan's duration is determined by the expected time it will take your dependents to become financially independent.

So, when determining the tenure to choose for 1 crore term insurance, carefully consider the age of your dependents, the duration of your present financial responsibilities (loans, etc.), and your expected year of retirement. Please keep in mind that your tenure choices have ramifications (mainly because term insurers do not allow you to change the tenure of your plan).

(i) If you select a shorter tenure than what is required: Neha, a 30-year-old, chose a Rs 3 crore coverage for 15 years. Her beneficiaries include her 32-year-old spouse and two sons (1 and 2 years old).

Neha died of natural causes at the age of 50, five years after completing her term plan. Her husband, who is now 52 years old, is nearing retirement, and her boys, who are 21 and 22 years old, have yet to complete their studies. Neha, who made considerable contributions to the family's financial well-being, is now survived by three financially vulnerable relatives who could have done far better with the term plan's cover amount. However, because she purchased a plan that only covers her until the age of 45, her family will be financially defenceless after her death.

(ii) If you pick a longer tenure than is required: Soham, a 30-year-old, chose a Rs 1 crore coverage for 65 years. Beneficiaries include his wife (28 years old) and two boys (1 and 2 years old).

Soham died of natural causes when he was 90 years old, believing he had left a legacy for his beneficiaries. Despite opting for the Rs 1 crore cover 60 years ago, its value has significantly decreased. In addition, his children are now in their senior years. Soham could have done considerably better if he had chosen the term plan until he was 65 and then invested the premiums (from 65 to 95 years) in real estate or savings.

Have you ever considered how long you will need life insurance? Traditional term plans of 1 crore term insurance provide coverage for a defined number of years, while some new options offer protection for up to 99 years. While purchasing a term plan that covers you until you are 99 years old may appear to be a safe investment, it is sometimes a terrible financial decision because your dependents may not be financially dependent on you. All you'll wind up doing is paying higher premiums for coverage your dependents don't require.