Term Insurance for Senior Citizens

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

The following are some of the key features of a term insurance plan for senior citizens:

Age Limit:While the age of entry for availing a term plan is 18 years, most life insurers in India allow senior citizens up to the age of 65 years to purchase a term insurance policy. Additionally, this insurance cover can be extended up to the age of 85 years. So in the case of the policyholder’s demise before the age of 85 years, the insurer will pay the sum assured to the nominee.

Death Benefit: Term plans are pure protection plans so, in the event of the senior citizen policyholder’s demise during the policy term, the insurer will pay out the sum assured as death benefit. This pay-out will be made to the registered beneficiary or nominee specified in the life insurance policy contract

Premium Payable:The benefit of any life insurance policy remains in effect till the policy matures as long as all due policy premiums are paid. While term plans are considered to be the most affordable life insurance policy variant, the premium amount increases the older a policyholder is at the time of purchasing the term plan. Prospective policyholders can know the premium payable for their senior citizen term plans by using the online term plan calculator.

Medical Test: At the time of purchasing senior citizen term plans, the prospective policyholder has to undergo a medical test. This is done to ensure that any pre-existing conditions like diabetes or cardiovascular disorders are known to the insurer at the time of insurance purchase. The existence or absence of pre-existing conditions impact the premium payable for a senior citizen term plan in India.

Add-on Covers Available:Term plans including those for senior citizens are offered with optional add-on covers that can enhance the coverage provided by the death benefit of a term policy. However, this enhanced coverage usually comes come at an additional cost. Examples of add-on covers available with a senior citizen term insurance policy include accidental death benefit, waiver of future premium, return of premium, terminal illness cover, etc. These add-on covers are not mandatory and can be availed as per the policyholder’s unique requirements.

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.

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:

Even though you can purchase term insurance as a senior citizen, it is not advisable primarily due to the high premium charges that are applicable to such policies. Moreover, the older you are, the higher is the risk of being diagnosed with pre-existing conditions that can push up insurance premiums even further. Also add to this the fact that your earnings might decline or stop altogether after retirement and the term insurance premium amount paid will not generate returns. So, purchasing term insurance for senior citizens might not be the best fit for achieving your financial goals or ensuring financial security for your loved ones. In such a situation, there are a couple of alternatives that you should consider instead of a senior citizen term plan, such as: