Should Retirees Buy Term Insurance?

What is Term Insurance, and why is It Necessary?

In today’s day and age, term insurance is a must buy for every individual. However, before purchasing a term plan it is very important to know what is term insurance.

Term insurance provides life cover for a definite period to the policyholders. It is a time-bound policy where regular premium payments are necessary. Upon the death of the policyholder, the entire amount of the term insurance policy is payable to the elected beneficiaries as a lump sum amount. A term life insurance plan can safeguard a family against any liabilities.
The term period can be chosen between 5 years to 30 years.

Changing demographics and lifestyle choices of families in India have shown that individuals may have financial liabilities which can affect them till their retirement age. The elderly population of the country has been increasing at an alarming rate. The community is all set to increase to 20% of the total Indian population by the year 2050. Many banks offer term insurance plans to an 80-year-old subject to a perusal of their medical history.

A term insurance plan provides senior citizens peace of mind.

Who is Eligible for a Term Insurance Plan?

In recent times, it has become possible for individuals of the age of 65 to opt for a term insurance plan. However, they will be subject to scrutiny and medical tests. Upon clearing these and being devoid of any terminal illnesses, the term insurance policy can be bought by the elderly. The insurance premiums are understandably higher for senior citizens.

Benefits of a Term Insurance Plan for Retirees

Financial Stability

It was estimated that most aged people in India require some form of medical care or in-home assistance once they turn 70.

Medical costs tend to go up, and without long term insurance policies, retirees are prone to financial difficulties.

Health insurance plans only cover some portion of the hospital bills. Relying solely on the children to provide finances for medical bills can be detrimental to all involved parties. The coverage provided by a term insurance plan ensures that proper assistance can be provided to the policyholders.

Security of the Members of the Family and Catering to their Need

Term insurance plans can help to secure the family's future upon an untimely death in the family. Individuals retire roughly around the age of 65. If you have a family that is reliant on you monetarily and if the family lacks the resources to fend for themselves upon your death, it is crucial to consider a term life insurance plan – as uncomfortable as it may be.

The purpose of the plan would be to ensure that the policyholder’s spouse or children continue to have the same standard of living.

The policy amount should be adequate to cover the critical expenses in the course of life, such as a wedding in the family.

Quite a few Indian couples delay the whole process of having children. As a result of this, when the parents are ready to retire, the children are still pursuing their education. A term life insurance policy can cover the costs of their further education and provide financial assistance if something happens to the parents.

Tax Exemptions

Premiums paid on the life insurance policies are exempted from taxes for all the retirees.
The claims received by the beneficiaries are also not taxed under Section 10D of the Income Tax Act. In a way, buying a life insurance cover is "purchasing money" for your expenses that are bound to arise during old age.

Low Premiums of the Term Insurance Policy

A long-term insurance policy has low premiums since there is no aspect of investment. The entire premium goes towards the life cover of the policyholder. Once the policy expires, there is no maturity benefit. There is no survival benefit of the term insurance, which results in the low premiums.

The terms of the policy are quite simple to understand. There are no loopholes and added risks involved. Retirees can either go to the bank themselves or take the help of the bank agents to apply for a term insurance policy.

Value for Money of the Life insurance Policy

If life insurance is what you are looking for, investing in a term life insurance plan is appropriate as the risks are very low. Most retired people would not want to gamble with their savings by investing in high-risk financial products.

Additional Benefits and Riders

Insurance companies also provide additional benefits with the term insurance policy such as critical insurance, partial disability cover, accidental benefits, etc. Although these come with additional charges but are essential to invest in the course of life.  Aged individuals should invest in the added riders as they are more prone to risks and injuries.

Debt Payment and other Liabilities

A term insurance plan is instrumental in protecting senior citizens and retirees who are still servicing debts. Any amount that is left over upon the death of the policyholder can be covered with the payout from the term insurance policy.

Insurance can ensure that senior citizens are not compelled to take up part-time jobs to meet their liabilities.

Timely Payouts to the Nominee

The terms of a term life insurance plan are quite straightforward, and the insurance amounts are settled immediately once the requisite claim formalities are fulfilled by the family members.
Another reason to invest in a term insurance policy for retirees is that if a policy has been active for more than 10 years, the chance of the claim being denied is almost nil. As per the IRDAI guidelines, insurance companies cannot reject the claims if the policyholder has made all the disclosures. It saves the nominee from a lot of grief, especially if the family is going through difficult times.

Funeral Costs

The money from the insurance plan can also be used to pay for the funeral of the deceased family member in case the family lacks the funds to organize it. Financial institutions suggest that the amount of coverage must be 10 times the annual income of the policyholder when they were employed.  Various requirements of the policyholder and their family can easily be accommodated in the term life insurance plan due to the flexibility offered by most of the banks.

Conclusion

Most banks today offer term life insurance plans to individuals who are at any stage in their life. The premiums for the term insurance plans are continually dipping so they have become highly affordable to the common man. Senior citizens are an essential target group for banks, so you will find that there exists a market offering that is tailor-made for retirees. Details of various policies can be found on the individual bank websites. It is never too late to make prudent financial decisions.

Note: You should also check the term insurance benefits if you are planning to purchase the term insurance plan.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.