How to Choose the Right Term Insurance Plan for You

Choosing the right term insurance plan is key to securing your loved ones’ future. Insuring yourself is one way to provide for them financially even if you’re no longer there so they can focus on healing from your loss.

There are different types of life insurance policies available on the market, and term insurance is one of the most affordable and straightforward options, particularly suited for Filipinos looking for protection without the high premiums associated with permanent life insurance plans.

What is a term insurance plan? Term insurance only provides coverage for a specific period, offering a death benefit to beneficiaries if something happens to them during the insured term. However, choosing the correct term insurance for you can be overwhelming because so many options are available in the market.

In this guide, we walk you through how to choose a term insurance plan that’s right for you. 

One of the most important aspects to consider when choosing the right term insurance plan is determining the required coverage amount. Often, people get a set amount that they think is enough to replace their income and cover essential expenses for their beneficiaries in case of their passing.

• Coverage should ideally cover the following:
• Everyday living expenses
• Mortgage or rent payments
• Children's education
• Outstanding debts
• Emergency funds
• Funeral expenses

Now, while you may have an amount that can cover all of this from the get-go, you should also consider inflation. The rising living costs can render an initially sufficient insurance policy inadequate over time.

We recommend multiplying your annual income by 10 to 15 times to give your family a coverage amount that will leave them financially stable just in case the worst happens.

Consider the policy term that aligns with your goals. A term insurance policy typically only lasts for a fixed period, such as 1,10, or 20 years. Knowing the type of insurance you want is key to securing your financial goals.

For example:

• A 1-year term insurance plan is a viable option if your financial status cannot handle the initial payments of a longer insurance term but you still want to protect your family. This budget-friendly option will give you the security you need without straining your finances.
• A 10-year term insurance plan could be ideal if you're nearing retirement and looking for coverage to support your dependents during your final working years. This can provide your family with temporary protection while you focus on saving for your retirement.
• A 20-year term insurance plan may be a better option for you if you’re growing a family and want to ensure they’ll be financially secure for a lengthy period.

When deciding on a term insurance length, consider your current realities, present stage in life, and future responsibilities. There is a myriad of term options that you can choose from that can seamlessly fit into your plans. 

For many Filipinos, living within one’s budget while preparing for the future can be difficult, primarily if insurance premiums can significantly dent your take-home pay.

Premiums for whole-life insurance plans can be pretty costly. In addition to paying for the first year plus the subsequent years, it may be a huge financial undertaking for you. The benefit of term insurance plans is that they offer more affordable premiums, ideal for individuals who want to protect their loved ones.

Why are term insurance plans cheaper? Because the coverage period is limited, they do not come with a cash value accumulation feature. However, it’s still important to remember that the cost of premiums for term insurance will still vary based on factors like age, health condition, and the amount of coverage you choose.

You should also consider that over time, some insurance providers may increase your term insurance coverage premiums after a certain number of years. Take note of this because ensuring you stay within your budget is critical.

Additionally, some insurance plans offer the flexibility to convert to a permanent life insurance plan once the term expires. So, this may be an excellent transition if you want to opt for a more permanent plan.

One thing you should also consider when choosing a term insurance plan is the flexibility of its policy and additional riders available. Some term insurance plans have rider benefits, allowing you to customize your insurance policies to suit your needs further.

Here are some common riders you may find:

• Critical illness riders: Offers the insured a lump sum payout if diagnosed with a critical illness listed on the policy. Often, these are critical illnesses such as heart attacks, stroke, or some forms of cancer.
• Accidental death benefit riders: These riders provide the beneficiaries with an additional payout if the death occurs due to an accident.
• Waiver of premium riders: If the insured becomes disabled or unable to work, the insurance plan premiums are waived.

Riders are an excellent way for you to be prepared for the unexpected. If you’re trying to decide between different term life insurance policies, consider the availability of riders. 

Insurance providers, through their insurance agents, will assess your health, family history, and lifestyle to determine your premiums. Healthier individuals with a healthy family background tend to pay lower premiums, while smokers or those with pre-existing medical conditions may be faced with higher premiums.

Here are some of the factors that can influence your premiums:

• Smoking
• Pre-existing health conditions
• Family history
• Age

When choosing the right term insurance plan, timing is another consideration. If you want to know when the best time is to get term insurance, the answer is as soon as possible. The cost of term insurance can increase as you get older, so availing of insurance sooner rather than later can play a part in the price of your premiums.

For example, a 25-year-old individual will generally pay less for a 10-year term insurance policy compared to someone who is 35 years old.

Aside from your age, you should consider any significant life events that can hinder you from paying for insurance. Life changes can lead to increased financial responsibilities, so make sure also to consider this before you get insurance.

Some term insurance policies can renew after the initial term ends, either for a set number of years or for life. If your insurance needs change over time, this can provide a valuable opportunity to extend your coverage without waiting for the waiting period to finish.

Just remember to review the renewal terms before committing to your policy. Sometimes, premium renewals may be much higher than the initial price. 

Selecting the right term insurance policy is an investment in your family’s future. It’s essential to assess your needs, compare options, and consider your lifestyle and financial obligations.

Now that you know how to choose a term insurance plan, it’s time to implement your knowledge. It’s time to shop for a life insurance plan that fits your needs.

Start protecting your family today by going through Allianz PNB’s range of insurance products. Partner with us today, and let us give you peace of mind and ensure that your loved ones are taken care of no matter what the future holds.