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Does it Make Sense for Senior Citizens to Buy Term Insurance?

Term insurance is a pure life insurance plan that covers risk on the death of the policyholder. In case of the untimely death of the policyholder, death benefits are paid by the company to the nominee of the policyholder. It provides financial security in case of untimely death, especially of the breadwinner of the family.

Changing trends have made term insurance policy more inclusive, making it easier to buy term insurance for senior citizens. It is now offered to a broad spectrum of people- from youngsters to senior citizens. People in their fifties and sixties are purchasing many of the insurance plans. It is due to the reason that little was being offered earlier, and little information was disseminated in the past through traditional means.

Term Insurance for Senior Citizens

To buy term insurance for senior citizens, one needs to be aware of what exactly such plans entail. Senior citizens are financially dependent on others as the income sources dry up, financial dependency increases. More often than not, spouses of the breadwinners are overly dependent on their income and after retirement, their pension. In such a scenario, the untimely death of such a person leaves the dependents at the total mercy of others. To avoid such a scenario, buying term insurance for senior citizens is the best way to preserve self-respect and fulfil basic needs.

Buying term insurance for senior citizens offer the following:

Financial Independence of Your Spouse

Term insurance for senior citizens acts as an income source if the spouse is not entitled to a pension or any other means of income. After the death of the breadwinner, term insurance money is the best way to secure financial security.

Financial Independence of Dependent Children

Being a senior citizen, it is not uncommon to find financially dependent children. Amidst the time of crisis, term insurance can be a source of mild relief in the financial aspect. Tuition fees, education expenses, and other expenditures can be covered if one is to buy term insurance for senior citizens.

Legacy Money

Even if one has no dependents, a pure life insurance cover can be a posthumous gift to one's loved ones. That money could be used for any purpose – for the betterment of their lives, for investing, or just for security purposes in case of unforeseen circumstances.

Clearing Loans and Other Debts

While loans and debts are taken when one needs money for any purpose, it is a liability that has to be paid back sooner or later. If the person has died with debt under his name, it is the family of such a person who has to live their worst-case scenarios amidst the grief of loss. Money received through term insurance can be used to get out of such sticky situations while retaining the dignity of the family as well as of the deceased.

Best Term Insurance Plans for Senior Citizens

For suggesting buying term insurance for senior citizens, a few schemes by various insurance companies are provided below. These schemes are highly suitable for senior citizens.

Name of the Scheme

Features

IDBI iSurance Flexi Term

This scheme is by IDBI Federal Life Insurance Co. Ltd.

❏ Death benefits pay-outs- lump sum amount, a regular monthly income, a combination of both or all of the above, along with an additional 7.5% of regular monthly income.

❏ Minimum entry age- 18 years

❏ Maximum entry age- 60 years

❏ Maximum maturity age- 80 years

❏ Basic sum assured- Rs. 50 Lakh to Rs. 30 Crore

❏ Premium range- Rs. 6,030 to Rs. 12,450

❏ Premium payment- monthly, quarterly, yearly, half-yearly

❏ Accidental death benefit- available

Bharti Axa Life Flexi Term

❏ Death benefits pay-outs- lump sum amount, a regular monthly income or a combination of both

❏ Minimum entry age- 18 years

❏ Maximum entry age- 65 years

❏ Maximum maturity age- 85 years

❏ Basic sum assured- Rs. 1 Lakh to subject to underwriting

❏ Premium payment- monthly, quarterly, yearly, half-yearly

❏ Accidental death benefit- rider available

Aviva i-Life

Under this plan, a higher premium rebate is available to those who have a higher sum assured. In addition, an additional 5% rebate in premiums is available to female insurers.

❏ Death benefits pay-outs- lump sum amount, a regular monthly income or a combination of both

❏ Minimum entry age- 18 years

❏ Maximum entry age- 55 years

❏ Maximum maturity age- 70 years

❏ Basic sum assured- Rs. 25 Lakh to subject to underwriting

❏ Premium payment- yearly, half-yearly

❏ Accidental death benefit- rider available

HDFC Life Click2Protect 3D Plus

This plan covers the 3Ds- death, disease, and disability. A special feature of premium wave-off is available in case of permanent disability due to an accident.

❏ Death benefits pay-outs- lump sum amount, a regular monthly income or a combination of both

❏ Minimum entry age- 18 years

❏ Maximum entry age- 65 years

❏ Maximum maturity age- 75 years

❏ Basic sum assured- Rs. 10 Lakh

❏ Premium payment- monthly, quarterly, yearly, half-yearly

❏ Accidental disability benefit- available

Aegon Life Term Insurance

❏ Death benefits pay-outs- lump sum amount or 50% payment immediately after death and the rest as 3% sum insured monthly payment

❏ Minimum entry age- 20 years

❏ Maximum entry age- 65 years

❏ Maximum maturity age- 75 years

❏ Basic sum assured- Rs. 10 Lakh to subject to underwriting

❏ Premium payment- monthly, yearly, half-yearly

Features and Benefits of Term Insurance for Senior Citizens

The following are the key features and core benefits of term insurance for senior citizens:

Increasing Cover

Term insurance for senior citizens increases with time as they are adjusted to inflation. The increase in cover over time is dependent on the premium amount. The insurer does not need to purchase more insurance instruments in the future. However, the increase may not be enough to overcome the inflation level of the time. At almost the same cost, great coverage is offered by a regular term policy.

Single-Premium Amount

The option of a one-time payment (lump-sum amount) is available to the policyholder of a term policyholder. This type of arrangement is highly suitable for people who are careless with their payments or who do not want to make yearly payments. This arrangement also eliminates the tendency of the policy to lapse due to non-payment of the premium amount.

Limited Payment Term

There is an option available for making a one-time payment of a staggering amount for 5-10 years. This type of arrangement is highly suitable for young people who have limited liabilities and have a high investible surplus.  In this case, the family of the policyholder gets a monthly payment for a decade or more. In the best term policy plans, there is a provision of increasing the payments by 10% every year. This adjustment is made after taking inflation into account.

Returns

The best term policy plans are designed in a way that results in the return of the entire premium amount at the end of the term policy. Although it increases the premium amount during the initial years, the whole amount ends up getting recovered by the insurer.

Things to Consider While Buying the Plan

While buying a term policy plan, a few pointers help in buying the best term policy. These are:

Solvency Ratio

This is the measure of the financial capability of an insurance company. The solvency ratio needs to be 1.5 as per the IRDAI.

Critical Illness Rider

Having a critical illness rider enables the insurer to claim getting diagnosed for any critical illness such as pulmonary diseases, cancer, or tumours. The amount received can be used for paying high treatment costs.

Claim Settlement Ratio

This is a measure of the percentage of claim settlements made by the company for the total number of claims made in a particular year. Higher the ratio better is the company for taking the best term policy.

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