Term Insurance for Senior Citizens

There are so many Guptajis around us who need better pieces of advice related to term insurance. There is no denying the fact that term insurance is an excellent personal finance tool. If you have existing or contingent liabilities, term insurance can be a fantastic way of safeguarding your family’s future. It is always suggested that you should have a cover until you have personal obligations; hence, at least untill you retire.

However, in the Indian context, senior family members' responsibilities and roles never cease to exist. Due to traditional value systems, grandparents often raise grandchildren and manage household affairs. Hence, term insurance is critical for senior citizens to ensure their loved ones are adequately cared for even when they are not around.

This blog discusses everything you need to know about senior citizens' term insurance plans.

Who is a senior citizen as per Indian laws/standards?

Let us understand the concept of a ‘senior citizen’ as per Indian laws and standards. Different statutes might determine a specific age after which an individual might be considered senior. However, a common benchmark can be the superannuation age (retirement age), which is 60 years.

What are features of term insurance for senior citizens?

The following table illustrates the most critical features of term insurance plans for senior citizens:

How term insurance can help senior citizens in financial planning?

Here are a few benefits of term insurance that can help in better financial planning for senior citizens:

1. Tax benefits: You are entitled to claim a deduction under section 80C of the Income Tax Act, 1961 against the premium paid for term insurance. In addition, any death benefit received by the nominees is typically tax-free under section 10(10D) of the Act.

How will it benefit Guptaji? Our dear, and now-retired Guptaji, will have an approximate annual income of ₹11.2 lakh after retirement. Here is how his income tax would be calculated with and without section 80C deduction under the old tax regime (assuming he doesn’t have any other investment that qualifies for deduction):

Guptaji will end up paying an additional ₹33,280 as income tax during AY 2025-26 as he doesn’t have any tax-saving investment. Hence, he may consider buying a term insurance policy for better financial planning. He may also invest in other schemes that qualify for deduction under section 80C.

2. Financial support for beneficiaries/spouse: The family/nominees receive tax-free death benefits, which ensure their financial safety in the unfortunate event of the policyholder's death.

3. Debt clearance and estate planning: If the senior citizen has any outstanding debts (such as loans or mortgages), the amount can be paid out of the death benefits received.

4. Cost-effective alternative: Term insurance is quite cost-effective as it provides high coverage (from ₹1-3 crores) by paying a modest premium.

What are a few common misconceptions about term insurance for senior citizens?

Here are a few misconceptions about term insurance for senior citizens:

1. I am too old to qualify: There are many plans designed specifically for senior citizens, and the entry age can range from 65-70 years. You need to consult an agent before believing this myth.

2. Term insurance is too expensive for senior citizens: There is an obvious increase in the premiums due to the risk borne by insurance companies. However, term plans for seniors are often structured to be more affordable than whole-life policies. Insurers may offer plans with fixed premiums that do not increase with age or tailored coverage options that reduce costs.

3. Payouts are limited: The ‘death benefit’ or ‘sum assured’ offered by several Indian insurance companies can be up to ₹3 crore, a substantial amount meant to ensure the financial independence of dependents.

4. Health issues can prevent coverage. Again, this is a myth. While medical issues might be a factor in determining premiums and eligibility, various insurers have varying levels of medical scrutiny, including a complete waiver of health examination.

How to choose the best term insurance for senior citizens: A checklist

Here is a checklist to consider while buying term insurance for senior citizens:

• Assess your coverage needs based on current and future financial obligations, such as debts, living expenses, and potential medical costs.

• Compare the maximum entry age limit permitted by different insurance companies.

• Evaluate premium costs and prefer policies where costs do not increase with age.

• Check the CSR (Claim Settlement Ratio) of the shortlisted insurance companies.

• Review the quality of customer support and service.

Summing Up

Senior citizen term plans are excellent financial planning tools to ensure that the dependents are cared for even after the policyholder passes away. In Guptaji’s case, it is critical not to believe in myths related to term insurance for senior citizens. Rather, he must talk with an insurance agent to enquire about the best-suited plan for his age after assessing the family’s future requirements.

FAQs

What is the maximum age for senior citizens in India to qualify for term insurance?

In India, most term insurance plans allow senior citizens to enter into a policy up to 65-70 years of age, with coverage extending up to 85 years.

Are there any term insurance plans that do not require a medical exam for senior citizens?

Yes, some term insurance plans offer coverage to senior citizens without a compulsory medical exam, though the availability and terms may vary between insurers.

Can senior citizens get term insurance if they have pre-existing health conditions?

Senior citizens with pre-existing health conditions can still obtain term insurance, but the premiums may be higher, and the scope of coverage could vary depending on the insurer's policies.

What are the tax benefits of buying term insurance for senior citizens?

Premiums paid for term insurance are eligible for tax deductions under section 80C of the Income Tax Act, and death benefits received are generally tax-free under Section 10(10D).