Should You Buy a Term Insurance Plan in Your 50s?
There is no right age to buy term insurance—ideally, the sooner you buy one, the better. However, if you are in your 50s and have dependents who rely on your income or have outstanding loans and liabilities to repay, it's better to get term insurance coverage to secure your family from financial liabilities and ensure their financial security in your absence. While term insurance premiums may be higher for individuals over 50 years due to increased mortality risks1, the financial security and peace of mind can outweigh the added premium cost. In the unfortunate event of death, a term insurance policy provides death benefits to the nominees, ensuring crucial support for your loved ones and helping them to achieve important life goals like retirement planning or debt repayment or meet their daily lifestyle expenses.
Benefits of buying term insurance in the 50s
Buying Term insurance in your 50s can provide you with the following benefits:
Peace of mind
Term insurance provides the much-needed peace of mind that your family and loved ones are financially protected even in your absence. It provides a death benefit in the event of death of the life insured and ensures continuous financial support for the family.
Premiums
Term insurance provides life coverage at affordable premiums. Though the premiums for older individuals are higher1 comparatively to younger ones, it is still affordable to get optimal coverage to effectively tackle inflation and ensure your loved ones can live comfortably, even when you are not around.
Coverage for Outstanding debts and existing liabilities
Term insurance offers high insurance coverage to enable your family to repay them in your absence if you have outstanding loans or mortgages without any financial strain on them.
Tax Benefits
Term insurance policy premiums qualify for tax deductions under Section 80C of the Income Tax Act2 (under old tax regime). The death benefit received is also tax-free3. Moreover, if you opt for the return of the premium term plan, the maturity benefit received will also be tax-free under Section 10(10D), subject to specific terms and conditions4.
Flexible coverage
Term insurance plans offer flexibility to choose the sum assured, policy term, coverage options, and optional riders, allowing you to customise the plan according to your specific insurance needs.
Things to consider before buying Term insurance in your 50s
Claim Settlement Ratio
The claim settlement ratio indicates the number of claims received by an insurance company and the number of claims settled by it within a given year as against the total number of claims received⁵. A high claim settlement ratio can signify a company's ability to pay claims effectively and show its overall reliability. When buying term insurance, check the claim settlement ratio of the insurance company and choose the one with a high claim settlement ratio.
Coverage Amount
Assess your financial needs, such as outstanding loans, number of dependents, their living expenses, and future commitments like debt repayment or retirement income, before deciding the sum assured for your policy.
Optional Riders
Term insurance plans offer optional riders to enhance the coverage of the policy at a nominal additional premium. These riders provide financial security in addition to the base policy in the event of the specified covered event, such as critical illness rider, accidental death benefit rider, etc. Choose suitable riders for a comprehensive scope of protection.
Policy Term
Look for a policy term that ensures your family remains protected for a sufficient duration. You might want to choose a plan that covers you until your retirement or until your liabilities are cleared.
Evaluate your Health Needs
As you age, the chances of health conditions increase. Life insurance providers may require a medical examination, and existing health conditions could lead to higher premiums or limited coverage. You can add optional riders to your base policy as per your health needs.
Why is term insurance necessary in your 50s
Term insurance is necessary in your 50s for the following reasons:
Financial Dependents
If you have individuals in your family who are financially dependent on you, such as your spouse, children or older parents, then term insurance is one of the best ways to ensure that they are well taken care of - in your absence.
Existing debts or loans:
If you have liabilities or loans in your 50s, then the best way to protect your family from the burden of repayments in your absence is term insurance. Term insurance pays benefits to the nominee(s) which they can use to repay the loan without creating a financial burden on them.
Retirement Planning:
If you're nearing retirement age, having term insurance in place helps ensure your family’s security even when your income might reduce after you stop working.
Conclusion
Term insurance provides financial safety of your loved ones and ensures pay-out in the event of the death of the insured. It is never too late to buy a term insurance policy. Even if you are in your 50s, buying a term insurance plan can be a strategic financial move for retirement planning and future financial security.
FAQs
Can a 50-year-old get term insurance?
Yes, a 50-year-old can buy term insurance provided he fulfils the eligibility parameters of the chosen plan. However, premiums may be higher due to age and possible health conditions1.
What is the maximum age for term insurance?
The maximum age for purchasing term insurance typically varies between different types of plans. You can check the maximum age when choosing the right term plan.
Is there a salary limit for term insurance?
No, there is generally no salary limit for buying term insurance. However, the coverage amount you choose as the sum assured should be proportionate to your income and liabilities.
Can you buy riders with a term insurance plan in your 50s?
Yes, you can buy optional riders with your term insurance policy, such as critical illness coverage, accidental death benefit, or waiver of premium rider at an additional premium. These add-ons enhance the coverage offered by your base term insurance policy.
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