Term Insurance for Senior Citizens

Getting a term insurance in your 60s is essential to live a stress-free life in your golden years. Even in old age, you may have dependents like your wife, children, and grandchildren, or financial obligations like outstanding debt.

Hence, choosing the best term insurance plans for 60-year-olds is an ideal solution to safeguard your loved ones in your absence. Keep reading this guide to learn the importance of term insurance in your 60s and how to select the best plan!

Some of the key benefits available with a term insurance policy for senior citizens include:

Tax Benefits on Premium Paid:The premium paid for keeping a senior citizen term insurance policy in effect is eligible for tax benefits under Section 80C of the Income Tax Act, 1961. The maximum tax deduction available u/s 80C on life insurance premium payments is Rs. 1.5 lakh in a financial year. One can also get Section 80D tax benefits if one opts for and pays the additional premium due for the critical illness and disability rider or accidental death cover

Tax Benefit on Payout: The death benefit payout received from a senior citizen term insurance policy is exempt from tax under Section 10(10d) of the Income Tax Act, 1961. This tax exemption on term insurance plans is available even after the recent amendment made to Section 10(10d) in Budget 2023.

Enhanced benefits with Add-ons: Depending on the type of add-on cover chosen, senior citizens can get different types of benefits in addition to life cover. These can include lump sum payout on diagnosis of a critical illness with critical illness cover, return of premium benefit on survival of policy term, lump sum payout on accidental death with purchase of accident cover, up to Rs. 1 crore payout on terminal illness diagnosis with terminal illness cover and so on.

Tax benefits offered to senior citizens on a term insurance policy are as follows:

• Section 80C: Tax deduction up to ₹1.5 lakh is offered on the premium of term insurance plans under the Income Tax Act, 1961. (Note: Section 80C is not applicable under the new tax regime.)
• Section 10(10D): The maturity benefits of a term insurance policy given to the nominee are exempt from taxation.
• Section 80D: Tax deductions up to ₹25,000 are availed for health-related riders like a critical illness rider, terminal illness rider, etc., u/s 80D of the Income Tax Act.

There are many reasons why senior citizens aged over 60 years can consider purchasing a life insurance policy for themselves:

• To ensure dependents and loved ones receive an inheritance after their demise
• To provide a greater degree of financial security for family members and dependents
• Ensuring the financial security of your spouse even after you are no more
• For paying any property taxes or other property-related dues that might be remain unpaid at the time of your passing
• To cover costs that might be incurred by your family after your death like funeral expenses
• To ensure surviving family members are not burdened by any unpaid loans or other financial obligations that might be outstanding at the time of your death
• In case a senior citizen continues to contribute financially to the family, having senior citizen term insurance will ensure that family members are financially compensated for income loss resulting from the policyholder’s demise

Sum assured is the amount paid to the beneficiary in the event of the policyholder's untimely demise during the policy term. Calculating the correct sum assured for senior citizens depends on the following factors:

• Income: The sum assured should be at least 10 times your annual income. In their 60s, most people do not have any income. However, retirement benefits and investments can be used to determine the sum assured when purchasing term insurance plans in your 60s.
• Human Life Value (HLV): Human life value refers to the total economic worth of your lifetime. It considers various factors such as gender, age, occupation, and other variables. However, the process may appear to be time-consuming, but the result will be worth all the effort you put in.

Also Check: Human Life Value Calculator

Consider Mr. Singh to be a 62-year-old retired individual with the following profile:

• Dependant: Wife (60 years old and not working)
• Annual Household Expenses: ₹3,60,000
• Annual Medical Expenses: ₹1,40,000
• Total Expenses per Annum: ₹5,00,000
• Outstanding Home Loan: ₹8,00,000
• Existing Savings (Fixed Deposit and Bank): ₹12,00,000
• Support Required For: 10 Years

Calculation

• Total Expense Coverage Required = ₹5,00,000 × 10 = ₹50,00,000
• Add Outstanding Liabilities = ₹50,00,000 + ₹8,00,000 = ₹58,00,000
• Deduct Existing Savings = ₹58,00,000 − ₹12,00,000 = ₹46,00,000

As per the above scenario, Mr. Singh needs to have a ₹45 to ₹50 lakh sum assured to ensure that his family is able to manage their everyday finances in his absence. It will ensure that the dependants can cover their daily expenses and clear their existing liabilities.

Now that we have a clearer understanding of the key features and benefits of a senior citizen term plan, let’s discuss how you can pick a suitable senior citizen term insurance policy:

Term insurance riders enhance the coverage offered by the policy in lieu of an additional amount payable as premium. Some of the commonly available riders with term insurance plans for senior citizens are:

Coverage options available with a term insurance policy for senior citizens are as follows:

• Whole Life Cover

  Some insurance companies offer coverage that lasts from 99 to 100 years, compared to specific fixed-term insurance policies. It is helpful if you want to provide financial protection for your family in the event of your passing.

• Return of Premium

  The insurance company returns all the premiums paid if you outlive the policy. It is recommended if you want both protection and a financial return.

• Add-on Riders

  Riders are additional benefits that can be added to the base plan for better coverage options. These include:

  • Accidental Death Benefit: An extra benefit is provided if the policyholder passes away due to an accident.
  • Critical Illness Rider: The insurance company provides a lump sum amount if you are diagnosed with any serious illness.

Follow the step-by-step procedure to buy the best term insurance plans for 60-year-olds:

Step 1: Choose the Insurer

Review the policy terms of different insurance companies and select the one that suits your requirements.

Step 2: Visit the insurer's website

Visit the official website of the insurer and get details of different term insurance policies.

Step 3: Choose Policy Tenure and Sum Assured

Select the required sum assured and the policy term. You can go for a shorter policy term if you are in your 60s. The premiums of an insurance policy increase with age, so choose the term plan wisely.

Step 4: Fill out the application form

Fill in the required details, including your name, age, gender, contact information, date of birth, and financial information.

Step 5: Mode of Premium Payment

Choose the premium payment mode from the following options:

• Yearly premium payment
• Semi-annual premium payment
• Quarterly premium payment
• Monthly installments

Step 6: Mode of Payout

Select the method of payout from the following options:

• A lump sum amount is handed over to your nominee if you pass away unexpectedly.
• Part of the payout is given upfront, and the remaining amount is released as monthly instalments for a set period.
• Your nominee receives a fixed monthly income for the chosen duration.
• The monthly payout gradually rises over time and continues for a specified number of years.

Step 7: Term Riders

Select the term rider for additional coverage to the base plan. This rider includes a critical illness rider, terminal illness rider, accidental death rider, or other as per your needs.

Step 8: KYC Form

Fill out the Know Your Customer (KYC) form with the following information:

• Preliminary Details: Name, address, and contact details
• Identity Proof: Aadhaar card or PAN card
• Income Proof: Income Tax Returns (ITR)
• Address Proof: Utility bills or driving license
• Age Proof: Passport or recent photographs

Step 9: Medical Details

Share correct health-related information such as your height, weight, drinking or smoking habits, existing medical issues, etc. Ensure that everything is accurate, as inaccurate disclosures can result in your application being rejected.

Step 10: Medical Tests

In your 60s, the insurer might need you to undergo medical tests. This include blood tests, urine tests, blood pressure checks, diabetes tests, and cholesterol checks, to get an accurate picture of your health conditions.

Step 11: Terms and Conditions

Go through the policy’s terms and conditions thoroughly. This will help you understand what’s covered and what’s not, helping you avoid any claim issues later. Once everything looks good and you agree to the details, proceed to the payment section.

Step 12: Payment

Make the online payment through credit card, debit card, or net banking. After the successful payment and acceptance of your application, your policy will be finalised.

The following are the eligibility criteria for purchasing term insurance for senior citizens in India:

Before buying term insurance plans in your 60s, you must be aware of the myths surrounding these policies and the facts that should be considered:

Despite their various benefits, term insurance for senior citizens comes with a few limitations, such as:

The term plan for senior citizens offers the following key benefits to the insured:

Term insurance for senior citizens is an important financial tool owing to the following reasons:

Before purchasing a term policy for senior citizens, individuals should carefully evaluate the following factors to ensure adequate and suitable coverage:

Buying a term insurance plan early for senior citizens offers several advantages like