Policy Term

Policy Term (also called the tenure or duration of the policy) is the number of years for which an insurance policy provides coverage.

It is the period between the policy start date and the policy end date, during which the insured is covered and the insurance company is obligated to pay the claim if a covered event occurs. The policy term directly affects the premium amount and the total coverage provided. What is a Policy Term? For a term life insurance policy, the term could be 10, 15, 20, 25, or 30 years, or up to age 65 or 99. A 30-year-old buying a 30-year term policy will be covered until age 60. A 40-year-old buying a 20-year term policy will be covered until age 60. The premium for the same sum assured is higher for older ages because the risk of death during the policy term is higher. For health insurance, the policy term is typically 1 year, after which it must be renewed. Some insurers offer 2-year or 3-year policy terms at a discount (typically 10% to 20% off on the premium). Most health insurance policies in India are annual and must be renewed each year to maintain continuity of coverage and to avoid loss of cumulative no-claim bonuses. For endowment and money-back policies, the policy term can be 10 to 25 years. These are investment-cum-insurance products where the sum assured is payable on maturity at the end of the term, or earlier in the case of death. The longer the policy term, the higher the total premium paid (because you are paying for more years of coverage and more premium-paying periods), but the lower the annual or monthly premium typically is for some product structures. One key consideration with policy term is that the coverage should last as long as your financial obligations last. If you take a home loan of ₹50 lakhs for 20 years at age 30, your life insurance coverage should ideally last until the loan is repaid. Similarly, if you have young children, your policy term should ideally extend until they become financially independent (typically age 22 to 25). Buying a 10-year term policy at age 30 when you have a 30-year home loan and a newborn child leaves significant uncovered risk. Insurance companies may refuse to renew a health insurance policy at the end of the term if the insured has made too many claims or developed serious health conditions. This is why porting health insurance policies (switching insurers without losing continuity benefits) is important. Life insurance policies, once issued, cannot be declined for renewal as long as you pay the premiums — this is guaranteed by the IRDAI (Insurance Regulatory and Development Authority of India).