You purchase a term insurance policy for your loved ones who depend on your earnings for their expenses. You buy it with the objective that it will provide them with financial security in case you pass away during the policy term. But once you’ve completed all your short and long-term financial responsibilities and no longer have any financial dependency, it makes no sense to continue your term insurance.

This is why we recommend that you must have term insurance from the point in life when you have financial dependents to the point you become financially free. But, what does becoming ‘financially free’ mean? 

Let’s find out.

Generally, you become financially free when: 

👉 No one relies on your earnings for their expenses anymore

Meaning, your spouse, children, siblings, parents, and all those who used to depend on you for their expenses have now become financially independent (or have passed away). Usually, this will happen by the time you reach the age of 65 or 70. Therefore, generally, it’s recommended that you take a term insurance policy until 65-70 years. However, this could vary depending on your preferences, life choices, and family priorities. So, make sure you don't blindly follow any thumb rule and decide this based on your life plans.

👉 You’ve built a solid corpus for a lifetime

The sole purpose of purchasing term insurance is that your family doesn’t have any financial burden in your absence. So, if you’ve created enough wealth that will last a lifetime - it will help your family deal with the finances both in the short and long term and take care of all their financial needs. And, you won’t need the term plan anymore. You can simply stop paying the premiums and the policy is closed.

👉 You’ve fulfilled all your financial responsibilities

Meaning, you’ve had financial responsibilities in the past, and fulfilled them all. For example, you’ve paid off your children’s higher education fees, repaid all your loans and liabilities, paid off for your children’s marriage, etc. 

Let’s look at some examples to gain a little more clarity - 

From the above examples, it is clear that Rahul is financially free. Hence, he won’t need term insurance. Amey, on the other hand, still has financial dependents as well as pending responsibilities. Hence, he is not financially free yet - and should continue keeping his term insurance plan until he becomes financially free. 

Summing up!

A term insurance policy is not required forever. You only need it from the point when you have financial dependents till you become financially free. You can stop it once you have created a sufficient corpus, fulfilled all your major financial responsibilities, and don’t have any financial dependents.

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