Understanding Policy Term Your Guide to Insurance Coverage

Life Insurance plans offer coverage for a specific period known as Policy Term or Policy Period. The policy term indicates the maximum duration for which the policy's life cover will be active. Except for whole life insurance plans, other life insurance policies only cover you for a set number of years. For example, you can be covered for 5 years, 10 years, 20 years, and so on. You must pay premiums to keep the policy active during this time.

When you purchase your life insurance policy, you must specify its term. Usually, you cannot change the policy term after buying a life insurance policy. Therefore, you should carefully consider the policy term of your life insurance plans.

Depending on your life insurance and financial requirements, you may need to select different policy terms for different policies. The following considerations will influence your policy term selection:

• The monetary goal or need that the policy will cover
• The age at which you plan to retire
• Policy withdrawal rules, either partial or total
• The policy's cash flow
• Maximum policy term allowed

Policy Term is an important concept, especially in term insurance, because it covers fatalities during this term. Therefore, the duration for which you decide to get covered by a term plan becomes crucial, as it is a pure contingency plan securing your family's financial future. It will depend on how long you have dependents who require the security of a term plan.

On the other hand, Whole Life Insurance, Endowment Plans, and Unit-Linked Insurance Plans provide policyholders with maturity benefits if they survive the policy term. So, the policy term you choose for these plans will also be influenced by your financial goals. 

Neha Panchal - Financial Content Writer

Neha used to be an Engineer by Profession and Writer by passion, which is until she started pursuing full-time writing. She's presently working as a Financial Content Writer, with a keen interest in all things related to the Insurance Sector.