Importance of Term Insurance at Different Stages of Life

Our needs change with age; typically, increase with age. Whereas, as children, our responsibilities may be limited, as we grow older, our needs keep increasing – education, loans, home, car, property, assets, and increasing lifestyle expenses. Term insurance is a need for many, not an option. Especially for those who have dependents, they must buy term insurance as it provides coverage against uncertainties: death, disease, and disability.

Let’s look at how and why term insurance may be necessary for people at different stages of life. 

In the early 20s

In the early 20s, most individuals are single, are either studying or might have just started their careers, have parents who are still earning, and do not have too many liabilities or assets to take care of. At most, they may have the responsibility of repaying student loans. 

Need for term insurance in the early 20s

Those in the early 20s should buy term insurance plans for two critical reasons:

1. To ensure their student loans are covered by term insurance in case something happened to them
2. To provide financial support for their parents in case something happened to them

Most student loans start in the range of Rs 15 lakh to Rs 30 lakh. Term insurance of sum insured between Rs 20 lakh and 30 lakh should be a good start for those in their 20s. A term period of 30 years to 40 years would ensure this high sum assured at a low premium. On average, the annual premium of this term plan would be around Rs 3000 to Rs 4000.

 

In the late 20s and early 30s

By the late 20s and early 30s, most individuals usually have a clear idea about their careers, might have a permanent job with a stable salary, and are more settled than in their 20s. In India, it is common for individuals to marry in their late 20s or early 30s. This is also the age when professionals start investing in buying a house or a car and may have loans. What do these two factors mean for their term insurance plans?

Need for term insurance in the late 20s and early 30s

Those in their late 20s and early 30s should buy term insurance plans for the below reasons and needs:

1. To ensure that their family members have enough financial resources to pay off their loans (house loan, car loan).
2. To provide financial support for their family if something was to happen to the policyholder.
3. As an individual’s income increases with changes in jobs and promotions, they might want to improve their term insurance sum insured as their capacity to pay premium increases. The early 30s would be a good time for individuals to review and enhance their term insurance plans.

Experts suggest those in their early 30s must buy term insurance plans five or six times their annual salaries. E.g., if a person’s annual salary is Rs 10 lakh, they should have a term plan of at least Rs 50 lakh to Rs 60 lakh. The premium amount of this term plan would range between Rs 5000 to Rs 7000.

 

In the 30s and 40s

In the 30s and 40s, individuals’ needs are no longer just for themselves. They have many family members to look after wife, aging parents, and children. Children’s’ needs increase as they grow, think education, extracurricular activities, hobbies, and more. Parents, too, start having more healthcare needs as they grow older. Moreover, retired parents may not have a regular monthly income and might depend on their children.

Those in their 30s and 40s should buy term insurance plans for the below reasons:

1. To ensure there is adequate financial security for their entire family (parents, wife, and children)
2. To ensure their family members can meet expenses (planned or unplanned) if something was to happen to the policyholder.

Experts suggest that people in their 40s, who have dependents, must have a term insurance plan of at least one crore or more. With rising costs and inflation, a term insurance plan of Rs 1 crore is essential. It may cost around Rs 18000 to Rs 20,000 annually. 

 

In the 50s and 60s

By the time people are in their 50s and 60s, they start making plans for their retirement. Besides, they also have more significant expenses such as higher education of their children, medical needs of parents, weddings of their children, or any other big plans.

Those in their 50s and 60s should buy term insurance plans for the below reasons:

1. To continue their need for protecting their family members financially if something was to happen to them.
2. To ensure that the money can pay off all their outstanding loans, they leave behind as sum insured from the term insurance.
3. To ensure that any significant expenses such as their kids’ education and wedding can be taken care of by the term insurance sum payout.

Experts recommend a term insurance plan of at least Rs 1 crore or more. It may cost around Rs 18000 to Rs 20,000 annually. 

 

Over 60 years

By the time people retire in their late 60s, their term insurance requirements may decrease. They may not have too many loans to pay off, their children might have started earning, and they may have saved enough money for their retirement. But there is one reason one may want or need a term insurance plan in the late 60s and 70s. They may want to leave a financial legacy for their children or grandchildren.

However, it should be remembered that many term insurance companies have a maturity age of 65 or 70 years.

Now that we’ve discussed the need for term insurance at different stages of life, let’s look at some right term insurance plans available in the Indian insurance market.

HDFC Life Click 2 Protect 3D Term Plan

• Minimum sum insured: Rs 10 lakh

Coverage years: 75, 80, life long

Policy term: 18, 25 – 65

Provides options of 9 plans to customize

 

Kotak Mahindra e-Term

• Policy term years: 5 to 75 years

Coverage years: up to 40 years

Minimum sum insured: Rs 25 lakh

Offers increasing recurring payout option

SBI Life eShield

• Policy term: 18 – 60, 65

Minimum sum insured: Rs 35 lakh

Coverage years: up to 80 years

Offers in-built accelerated terminal illness benefit

 

To sum it up

From the time individuals start their professional journey to starting a family and attending to the needs of the growing family, having a term insurance plan as part of financial planning can make a great deal of difference to a person’s finances and future planning. Have you begun your search for the right term plan with sufficient sum insured for your family?