How long should you keep your life insurance policy?

You only need life insurance as long as someone depends on your income.

So, if you're 35 today and plan to retire by 60 or 65, a life insurance policy for 25 to 30 years makes sense.

By that time, your kids will likely be financially independent, your home loan (if any) will be paid off, and your spouse should be secure thanks to your retirement savings.

Basically, the very need for insurance disappears.

Why longer doesn't mean better

Extending your cover well into your 70s or 80s may feel comforting, but it's usually unnecessary—and expensive. Let's look at what a Rs 1 crore term plan costs for a healthy 35-year-old male:

• HDFC Life Click2Protect Super (Life Option)
  
• Premium till age 60: Rs 16,599
  
• Premium till age 80: Rs 24,512
  
• ICICI Pru iProtect Smart
  
• Premium till age 60: Rs 14,455
  
• Premium till age 80: Rs 23,098

That's roughly a 50-60 per cent higher premium just for extending the cover till age 80. And remember, you'll be paying this higher premium every year—not just later in life, but starting right now at age 35.

Let's put that in perspective. If you opt for the shorter-term plan and save even Rs 8,000 a year, and invest that amount in an equity mutual fund earning 12 per cent annually, it could grow to over Rs 1.2 crore in the next 45 years. That's money your family could actually use, unlike a term policy that may never be claimed.

Who benefits from longer tenure?

The insurer does.

So, we suggest you plan your finances well. That way, your family wouldn't need an insurance payout to help your family.

So, what should you do?

If you're salaried, align your term plan with your expected retirement—usually age 60 or 65. If you're self-employed or have late financial responsibilities (say, dependent parents or a younger child), you could extend it until 70—but only if truly necessary.

Don't pay extra for something your family won't need. Instead, invest the savings from the lower premium into long-term investment options such as mutual funds. These investments will help you build real wealth, not just a payout that may never be claimed.

If you want to know which mutual funds to invest in, head over to Value Research Fund Advisor—our customised service that helps you build and manage a goal-based portfolio.

Also read: 9 tips to buy the most effective life insurance

This article was originally published on May 08, 2025.