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News & Views

Wednesday, May 11, 2016

70 is the new 60 for life insurance

[Source : The Economic Times]

Recently, a 60-year-old doctor from Hyderabad bought a term plan worth Rs 1 crore for a term of 15-years, paid a single premium of Rs 8 lakh. If you know anything about life insurance coverage, this should surprise you. Ideally, a 60-something, nearing retirement has no reason to buy or extend his life coverage by 15 years. In fact, financial advisors usually plan your portfolio in such a way that by retirement your term covers usually end.

However, data from insurance companies tell you a different story. Term life insurance plan sales for the 50+ age group is on a rise. "The 50+ age category comprised merely 1-1.5% of life term sales on our platform in FY15. This number has gone up by more than 3 times to nearly 5% in FY16," says Yashish Dahiya, founder and CEO of Financial advisors also confirm this trend. What's the reason? Life cycle shifts, experts say.

People are getting married late, having kids even later and then there are long-term housing loans that rollover the retirement age. "Dependants and liabilities do not necessarily end at retirement age. In such cases people are choosing to go for longer covers," says Anil Rego, CEO, Right Horizons, an investment advisory company. "Typical profile of people seeking such cover have either their kids financially dependent on them till very in their life or they have liabilities and unpaid debts," adds Dahiya.

For the Hyderabad-based doctor who created a record by paying a premium of Rs 8 lakh on an online platform, it was liabilities. Also, he continues to practice. So there is an income to protect. That is another category. Increasingly, people who are choosing to work beyond retirement and therefore extending the term-cover makes sense.

The industry realizes this need and have been coming up with appropriate covers. "It wasn't long back when term insurance was only providing cover till the age of 55. Now, insurance companies now offer term insurance plans that you can buy at 65 and will provide coverage up to the age of 80 years," says Dahiya. However, watch out for the premiums. A Rs 1 crore policy with a term of 20-years for a 60-year-old male will cost around Rs 50,000- Rs 70,000. So, if you think you fall in the category of late-bloomers where your financial responsibilities will spill over your retirement age, it is best to buy a longer- term plan and lock the rate now.

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