Know the pros and cons of buying Term Insurance after retirement

Getting a term policy is like buying peace of mind as it's not just for him; it's for the family's future security. However, the common myth that "term insurance is for younger people" has refrained many others like Mr Sharma from enjoying the benefits of a term policy. People fail to acknowledge that life after retirement is still long and can be considerably difficult without financial security.

So, let's look past the common misconception and see why a term insurance plan is good for Mr Sharma:

Outstanding loans

If you have existing liabilities, such as a mortgage or car loan, their obligation would fall on your retired partner if something happens to you. These loans could lead to financial hardship for your family. A term insurance policy can be structured to cover these liabilities, ensuring that your partner doesn't face financial strain in the event of his passing.

For example, if Mr Sharma has an outstanding mortgage of ₹20,00,000, a term insurance policy could cover this liability, preventing his family from losing their home or facing financial difficulties.

Young dependent child

Children rely on their parent’s financial support for education and living expenses as dependents. Unfortunately, suppose the policyholder were to pass away unexpectedly. In that case, a term insurance policy can help secure the children's future, ensuring they have the financial resources to complete their education and meet their personal needs.

Continuing with our example, if Mr Sharma's daughter's education costs ₹5,00,000 per year, the policy's death benefit could cover her tuition and living expenses, offering peace of mind for the family's future.

Future financial support

While you may feel physically fit after retiring, age-related health conditions or other financial emergencies could arise. Modern term insurance policies come with riders that offer additional coverage, such as critical illness insurance or income replacement options.

For example, if Mr Sharma develops a serious illness later in life and incurs medical expenses of ₹7,00,000, a policy with critical illness riders can cover these expenses, or a policy with supplemental income benefits could help with daily living costs if he's unable to work.

After considering the pros of a term insurance policy, Mr. Sharma is convinced to get one. However, all his reservations against the term insurance policy are not unfounded. Getting a decent term insurance policy after retirement is difficult, and one should consider the potential cons before finalising the policy terms.

Here are some of the most prominent cons that one should look into:

Limited options

You may find fewer term insurance plans catering to retirees. Insurance companies tend to offer more choices to younger individuals as they pose a lower risk. Therefore, as a retired person, some policies may no longer be available to you, or the ones offered might come with limited terms or restrictions on coverage. It could force retirees to choose between fewer options, possibly settling for a plan that doesn't fully meet their needs or offers inadequate protection.

Higher premiums

Premiums for term insurance generally rise with age, and retirees will likely face significantly higher premiums than when they were younger. For example, a 60-year-old might have to pay ₹30,000 to ₹35,000 annually for ₹1,00,00,000 coverage, while a 40-year-old might only pay ₹10,000 to ₹12,000 for the same coverage. If one's retirement savings are limited or living on a fixed income, the higher premiums could make it harder to afford the coverage needed, leading to either reducing the coverage amount or skipping renewing the policy altogether.

Restricted coverage

Due to age, the coverage retirees can secure may not be as extensive as it would have been when they were younger. Insurance companies often limit the maximum coverage amounts for older policyholders, meaning that even if retirees pay higher premiums, the death benefit may not fully meet their family's financial needs.

For example, suppose Mr Sharma had previously qualified for a death benefit of ₹1,00,00,000. In that case, he may now only qualify for ₹30,00,000 or ₹50,00,000, which might not be sufficient to cover all his family's expenses, including debts, education, and daily living costs.

Summing up

While a term insurance policy can still provide valuable financial protection even after retirement, it's important for retirees to carefully consider these pros and cons before deciding on the best plan to suit their needs and their family's future. Several insurance companies offer term insurance plans specifically for seniors. Alternatives are available if you are looking for term insurance for anyone over 60.