Buying a term plan in your 40s

Should You Buy a Term Insurance Plan in Your 40s?
 

Buying term insurance in your 40s is often considered a smart financial decision, as it provides substantial coverage at relatively lower premiums compared to older age¹. At the age of 40, one may have larger financial obligations, such as a child’s education and mortgages alongside the daily expenses, which can be covered and catered to by a term insurance policy, making sure your family doesn't have to carry the burden of debt or compromise their lifestyle if you're not around. However, deciding whether to buy term insurance depends on your specific financial situation, family obligations, and long-term goals.
 

Benefits of buying term insurance in the 40s
 

1. Premiums

   Term insurance premiums are relatively lower when purchased in your 40s compared to later, especially if you buy the plan at an earlier age¹.

2. Financial Security for Your Family

   If you have dependents, term insurance ensures your family’s financial security and takes care of their financial needs, such as education, daily expenses, and medical bills, even in your absence.

3. Peace of Mind

   Knowing that your loved ones will be financially protected provides peace of mind and allows you to focus on other aspects of life.

4. Tax Benefits

   Term insurance premiums qualify for tax deductions under Section 80C of the Income Tax Act² (under old tax regime). Further, the benefit received by the nominee under the plan is also tax-free³. The maturity benefit received under the return of premium plans also qualifies for an exemption under Section 10(10D) subject to specific provisions of the Income Tax Act of 1961⁴.

5. Customisation

   Term insurance offers customisation to suit individual insurance requirements. You can choose to enhance your coverage with riders like critical illness, accidental death, or waiver of premium riders, making the plan more comprehensive.

6. Covers for substantial liabilities

   One may have outstanding loans, substantial liabilities such as home EMI, or any other debts to be repaid. Term insurance provides coverage of such liabilities as it pays a lump sum amount to the nominees , which can be used to repay the loans and liabilities without creating a burden on them.
    

Things to consider before buying Term insurance in your 40s
 

Here are some of the things to consider while buying Term insurance in your 40s:

1. Assess financial liabilities and decide the coverage amount

   Assess and evaluate your financial liabilities, such as the number of dependents, mortgages, long-term debts, etc., to ascertain how much coverage you need. You can also use an online term insurance calculator to determine the coverage you may need based on your financial obligations. Don’t underinsure yourself, but balance your coverage with your current financial capacity.

2. Policy Term

   It’s important to choose a policy term that aligns with your future financial goals. A policy that covers you until retirement may be beneficial.

3. Premium Affordability

   Ensure that the premiums are within your budget over the long term. Avoid purchasing a term policy, which may have a higher coverage but becomes a financial strain.

4. Riders and Add-ons

   Based on your needs, you can add riders like accidental death or critical illness coverage to increase your policy benefits which comes with ad on cost in the premium.

5. Insurer’s Reputation and Claim Settlement Ratio

   Choose a reputable insurance provider for your term insurance policy and ensure to check its track record of efficient claims settlement. The higher the claim settlement ratio, the higher would be the chances of your smooth claim settlement.
    

Why is term insurance necessary in your 40s
 

In your 40s, you may have dependents, outstanding debts or mortgages, and other financial commitments. Term insurance helps ensure that your family is financially protected in case of your untimely death. It replaces your lost income, covers debts, and helps maintain your family’s lifestyle. Purchasing a policy at this age also allows you to benefit from more affordable premiums, which can be a great advantage for long-term financial planning.
 

Conclusion
 

Term insurance offers good coverage at affordable premiums compared to most other types of life insurance plans. Also, you can enjoy additional savings on premiums if you buy a term life insurance plan early. Your 40s are crucial when it comes to your career, family and building the life of your dreams. To ensure you focus on that and do not worry about your family’s financial well-being, it's ideal to buy a term insurance policy.
 

FAQs
 

1. Can a 40-year-old get term insurance?

   Yes, a 40-year-old can purchase term insurance. While the premiums for a 40-year-old may be higher than for younger individuals, they will still be affordable than if you wait until an older age¹.

2. What is the maximum age for term insurance?

   The maximum age for purchasing term insurance depends on the policy terms and insurance company.

3. Is there any restriction of minimum income requirement for buying term insurance?

   No, there are typically no minimum income requirement criteria for term insurance. You can choose the coverage under a term insurance policy based on your financial needs and requirements.

4. Can you buy riders with a term insurance plan in your 40s?

   Yes, you can buy riders such as critical illness rider, accidental death benefit rider, and waiver of premium rider, as available, to your term insurance plan. These riders provide enhanced protection against specific risks, offering more comprehensive coverage at a nominal additional premium.

Sources:

1. https://www.investopedia.com/articles/investing/102914/7-factors-affect-your-life-insurance-quote.asp

2. https://cleartax.in/s/80c-80-deductions

3. https://www.livemint.com/money/personal-finance/how-life-insurance-policies-are-taxed-11665145664260.html

4. https://cleartax.in/s/life-insurance-taxability