Is Term Insurance necessary for single individuals?

Term insurance is the simplest form of life insurance where you pay a specific amount of money (premium) in exchange for a sum assured (coverage amount), which the insurer would pay your dependents in case you pass away during the term. It is a security blanket meant to cover your obligations in case of your unfortunate and untimely death. However, if you survive the policy period, you do not get anything in return, as term insurance is an expense and not an investment tool.

For singles, this might be the biggest turn-off as they do not want to put money into an instrument from which they are not supposed to receive any return. After all, being single is a lifestyle choice, and why would a single person wish to have an expense from which no return is expected?

However, this perspective is built on common misconceptions about the utility and necessity of term insurance for those without dependents. Here, let us explore why term insurance is critical to personal financial planning, even for singles. We will dispel different myths and highlight overlooked benefits of term insurance for single individuals.

Benefits of term insurance for singles

If you are a single individual contemplating buying term insurance, here are some of the benefits that can let you make the decision:

1. By opting for term insurance, you ensure the financial security of your dependents (like parents or younger siblings). You can also nominate any trust or religious organisation of your choice so that the benefits are transferred to them in case of your demise during the coverage period.

2. If you have existing loans (home or otherwise), this insurance is an excellent tool for debt protection for your family. If you have term insurance with adequate coverage, it is ensured that the liabilities are not passed on to the relatives or dependents after your death.

3. If you ever consider having a family in the future, you can rest assured about the existing term insurance for which you can nominate your spouse or children in the future.

4. Term insurance helps you in leaving a significant philanthropic legacy.

5. It is an excellent tool for retirement planning, as having a policy in place can protect any retirement savings from being depleted for end-of-life expenses.

6. You are eligible for tax rebates under section 80C of the Income-tax Act, 1961, up to ₹1,50,000 per annum.

Special offers for single individuals

Some insurance companies have introduced plans specifically designed for single women, thereby offering coverage, critical illness coverage, and disability coverage for women policyholders. Furthermore, there is always the benefit of starting early in your insurance journey. Life is unpredictable, and you might want to have a spouse and settle down in the future. Hence, if you have already taken term insurance, you will never have to worry about your family’s financial security blanket.

For singles buying term insurance early, there are multiple advantages, starting with lower premiums and specific paying terms. Insurance companies typically offer lower premiums to younger policyholders due to the lower risk associated with their age. This makes term insurance particularly cost-effective for singles who are in the early stages of their careers.

For example, at 26 years old, Swati was offered a term insurance plan with an annual premium of ₹26,216 payable for 10 years (total outflow of ₹2,62,160). For this premium, she was offered coverage for 40 years and a sum assured of ₹1 crore. The reason for this offer was because of Swati’s young age and health condition.

In addition, insurance companies might offer critical illness riders, irrespective of the marital status of an individual. This rider provides a lump sum payment if the insured is diagnosed with one of the specified critical illnesses, such as cancer, heart attack, or stroke. For single women, insurance companies offer breast cancer and autoimmune disease-related riders. Hence, in the absence of a spouse, you have a significant cushion when burdened with serious ailments.

How to choose the right term insurance plan

The criteria for choosing the right insurance plan for single individuals is not different from anyone else. Here are a few things you should consider:

1. Always assess and decide your coverage amount before enquiring about term insurance. It is critical not to be over or underinsured; hence, sufficient protection for unforeseen circumstances should be provided.

2. The insurance term should be appropriate and should be planned while taking care of your life’s milestones, such as debt repayment and retirement age.

3. It is critical to check the insurer’s reliability by evaluating and comparing the Claim Settlement Ratio (CSR).

4. Always look for riders and add-on benefits meant for single individuals.

5. If you are confused, it is advisable to connect with a financial advisor.

Summing up

Term insurance is an excellent personal finance planning tool for single individuals. Besides securing your dependent’s future, you also get lower premiums at a younger age and critical illness coverage. It is a myth that term insurance is meant for people with children and spouses. Irrespective of your marital status, you should have term insurance for comprehensive financial planning.

FAQs

Is term insurance necessary for single individuals?

Yes, term insurance is crucial for single individuals as it provides financial security, debt protection, and tax benefits.

Can term insurance cover debts for single individuals?

Absolutely, term insurance can cover outstanding debts, ensuring they do not become a burden to family members.

What are the benefits of term insurance for singles?

Benefits include financial security for dependents, debt protection, the possibility of leaving a philanthropic legacy, and tax advantages.

How should a single person choose the right term insurance plan?

Assess the coverage amount needed, choose an appropriate term length, check the insurer's reliability, and consider any relevant riders.