Can You Purchase Term Insurance Without Income Proof?

Due to the pandemic, people are becoming aware of securing their lives. One of the best ways to do this is by taking a term insurance plan. However, many people have also lost their jobs while others have taken up temporary earning opportunities like contractual jobs or freelance work. In such a case they do not have a fixed earning source and no income proof. Can such people purchase a term insurance policy without income proof?

Find all the details in this article.

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Can You Purchase Term Insurance Without Income Proof?

You cannot buy a term insurance policy without submitting valid income proof.

This is required so that the insurance company can decide the sum assured, the risk involved, and whether the person is capable to pay the premiums on time or not. Moreover, submission of income proof decreases the chances of policy lapse.

What Income Proof & Other Documents Are Required

As stated above, you need to submit valid documents (including income proof) to purchase a term insurance plan in India. Note that the underwriting department of all insurance companies checks the authenticity of the income proof and can reject it if it finds any discrepancy.

Here is the list of documents you need to submit:

  • Salary slips of last three months
  • Your company needs to issue an income certificate
  • ITR (Income Tax Returns) not older than two years
  • Form 16
  • Previous six months’ bank statements

Moreover, it would be best if you keep the above-mentioned documents handy as they can enable you to capitalize on your term insurance tax benefits during the next tax window.

Other Important Documents Required Along with the Income Proof

Apart from the income proof documents, you need to submit other important documents as listed below:

  • Proof of Identity: In the first place, purchasing a term insurance plan will require official photo identification from your end. It could come in the form of standard identity documents such as an Aadhaar card, passport, PAN card, driving license, or Voter ID card. In some instances, it may also constitute an official attestation from a government agency or official with a photo and signature attached.
  • Age Proof: Many term insurance providers request a document that acts as proof of age to verify that you are within their age-appropriate range. This could comprise any identity documents that we have mentioned above like the Aadhar card. Such a document will have your date and year of birth. Beyond these options, you might also be asked to submit a birth certificate, a school or college graduation certificate, or a marriage certificate.  
  • Proof of Address: It is another important document needed for purchasing a term insurance plan. An address proof will serve as official evidence of your permanent address. You can present it as a passport, PAN card, or any other document for the identification mentioned above. Other address proof documents can be a ration card, a bank statement, telephone, or electricity bills.
  • Medical Reports: The cost of your term insurance premiums and the total sum assured depend greatly on your current health, as well as any medical risk you may encounter shortly. This is the reason your previous medical records as well as the most recent medical records constitute the bulk of the documentation for your term insurance.
  • Photographs: Like any other official application, you will be required to provide some of your most recent passport-size photos to verify your identity.

With these documents and proofs submitted properly, you can purchase term insurance without any hassles and enjoy the important benefits that come with it. Additionally, it is also possible to save a significant amount of money throughout the year by taking advantage of tax-free term insurance benefits that apply to the specific policy you have.

The Main Reason to Submit Income Proof

Paying timely premiums constitutes building the financial corpus.  The insurance company can use this amount to offer risk cover to those policyholders who need it at the time of any uncertainty. If a person does not earn, he/she will not be able to pay premiums regularly which could lead to a lapse of the policy.

Mentioned below are some more reasons why the underwriting department of insurance companies examine these documents:

  • The income proofs will help the insurance company determine the amount assured or total life insurance that could be provided to the person who is applying. They also help them decide the cost of the policy.
  • The insurance company evaluates the danger and the ability of you to pay your premiums on time. This is based on the documentation you submit to prove your income.
  • It eliminates the risk of over-insurance if the insured has purchased coverage greater than the cash value. This could pose a risk for the insurance provider and can result in the rejection of a claim.
  • In the event of a mismatch on the tax declarations, the insurance cover may be canceled and an insurance claim can be rejected. The submission of income proof when buying the term insurance shield you from this.

Final Word

Purchase term insurance without income proof is not possible as the income of the person applying is among the main requirements by which the insurer decides whether or not to provide the insurance plan or not. Therefore, you should have evidence of your income before deciding whether you want to make an application for any term insurance or not.

Written By: PolicyBazaar

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