Term Insurance Eligibility

What's inside? 🧐

• Introduction
• Term Insurance Eligibility Criteria
• Who Are Eligible To Purchase Term Life Insurance Plans?
• Documents Required For Term Insurance
• Why Must You Get A Term Life Insurance Plan?
• To Wrap It Up,

Introduction

You may be aware that each bank sets specific limits related to age, income, etc. for debit and credit cards. For instance, Bank 'A' may stipulate that only people over the age of 21 can apply for a debit and credit card. Another bank, say Bank 'B,' may impose age and income restrictions, such as allowing only people over the age of 18 and with a monthly salary of at least Rs. 25,000 to apply for a debit or credit card. You will not be eligible to get a debit or credit card if you do not meet these eligibility requirements.

Similar to this, a term insurance policy, too, has certain eligibility criteria that need to be met before you can purchase it.

Let’s learn about these eligibility criteria in detail - in this article.

Go to Top 🆙

Term Insurance Eligibility Criteria

1. Age eligibility

The minimum age requirement for all term insurance policies is 18 years. The maximum age limit ranges between 60 to 65 years, depending on the type of product you purchase.

2. Income eligibility

Income eligibility criteria may vary across insurers. With some insurers, you can buy a term plan if your income is Rs. 5 Lakhs or more,  whereas there are insurers who allow you to opt for a term plan even if your income is lower than that.

Your income also impacts the maximum sum assured you can opt for. Based on your income and the age at which you buy the policy, the insurer will calculate the maximum cover you’re eligible for. Usually, this is done by multiplying your income by certain factors (based on your current age) - such as 25X or 20X. And if you already have an existing life insurance policy, the cover amount of that policy will be deducted from the term cover you’re eligible for.

For instance, you’re 25 and have an annual income of INR 20 Lakhs. So, the maximum term insurance cover you can opt for can be calculated as - 20 Lakhs X 25 = INR 5 Crore (Taking 25X as the factor chosen by the insurer for that age bracket).

Now, say you already have a life insurance policy of INR 1 Crore. So, the maximum sum assured you’re eligible for will be INR 4 Crore (5 Crore - 1 Crore).

3. Educational qualification

Generally, the minimum education qualification required to purchase a term insurance policy is graduation. However, some insurers also allow non-graduates to opt for a term plan.

4. Location of residence

Insurers have several sets of pin codes for various insurance plans which they integrate at their backend systems. The list of pin codes is dynamic and keeps on changing. But - you can check the eligibility for your specific pin code, by entering it in the form when prompted. Financial advisors have this list of pin codes too. So, if you’re buying the policy through a financial advisor, you can ask them for this list.

Generally, all of the Tier1, Tier2 and most of the Tier3 cities would be included by the top insurance companies - but you should always check before going through with your application.

5. Occupation

Mostly, professionals, self-employed, and salaried individuals are eligible to buy term insurance. A few insurers also allow housewives and small business owners to purchase term insurance. Insurers, however, might impose restrictions based on the type of occupation - they ask a question about this in the proposal form.

If your job is too risky for the insurer to cover - for instance, if you work in an underground mine, construction, chemical factory, etc., they might reject your policy. This, however, majorly depends on the underwriting.

6. Maximum maturity age

While some insurers sell term plans with a maximum maturity age of 85 years, some sell plans with a duration of up to 99/100 years as well. Such long-term plans are marketed as ‘Whole life plans’.

7. Income proof documents

Term insurance policy is issued with the assurance that you will be able to pay the premiums required for the entire policy tenure or premium payment tenure (in case you opt for Limited Pay). To ensure the same, insurers will ask you to submit documents that prove your source and type of income. Following is a list of documents that you can use as proof of your income. You should have at least one of the below income proof documents to get the policy issued.

• ITR - Last FY / Last 2 FY
• Form 16
• Salary Slips - Last 3 months
• Salary Certificate
• Employer's Certificate
• Audited Company Accounts - Last FY
• Latest Employment Contract Letter
• Bank Statement - Last 6 months

Please note: This is a generic list of documents. Different insurers will ask for different sets of proof, for a different number of months/years. This will depend largely on your occupation.

8. Medical history

Your term insurance premiums and overall sum assured are dependent heavily on your current health as well any medical risks you might face in the future. You will have to undergo a medical examination before the issuance of the term insurance policy. If the reports indicate that you’re a higher risk to the insurer, they might not issue you a policy at all. And if another insurer issues you a policy, it will be with a massive amount of loading charges.

These were the eligibility criteria for term insurance policies, in general. The insurance company will issue you a term plan only if you fulfil all of the requirements they have as part of their policy.

Go to Top 🆙

Who Are Eligible To Purchase Term Life Insurance Plans?

Here are a few eligibility criteria to qualify for term life insurance -

➡️When Can You Start?

To buy a term life insurance policy, you need to be at least 18 years old. The upper age limit for purchasing these plans typically falls between 60 and 65 years, depending on the specific product you choose.

➡️How Much Do You Need To Earn?

Income requirements for term life insurance can vary significantly among different insurers. Some providers set a minimum income threshold of Rs. 5 Lakhs per year, while others may offer policies even if your earnings are below this amount.

Your income also plays a very vital role in determining the maximum sum assured you can opt for. Insurers calculate this by multiplying your income with specific factors based on your age. These factors might be 25X or 20X your annual income. If you already have a life insurance policy, its cover amount will be subtracted from the term insurance coverage for which you’re eligible.

For example, if you are 25 years old and earn Rs. 20 Lakhs annually, the maximum term insurance cover you could get is calculated as follows -

20,00,000 * 25 = Rs. 5 Crore (assuming the insurer uses 25X for your age group).

Now, if you already hold a life insurance plan with a cover amount of Rs. 1 Crore, the maximum additional sum assured you could secure would be Rs. 4 Crore (5 Crore - 1 Crore).

➡️What Qualifications Do You Need?

When it comes to educational qualifications, most insurers require that you have at least a graduation degree to purchase a term insurance policy. But don't worry if you haven't graduated yet! Some insurers are flexible and allow non-graduates to secure a term plan as well.

➡️Where Do You Live?

Your location also plays a critical part in determining your eligibility. Insurers maintain a list of pin codes that are integrated into their backend systems. These lists can change, so it is important to check whether your specific pin code qualifies.

Entering your pin code when asked during the application procedure will allow you to see if your location qualifies. This pin code list might also be given by your financial advisor if you are getting your policy through them. In general, top insurance companies cover all of Tier 1, Tier 2, and numerous Tier 3 cities. But before submitting your application, it's usually a good idea to confirm.

➡️Is Your Occupation Considered?

Most professionals, self-employed individuals, and salaried employees are eligible to purchase term insurance. Interestingly, some insurers also extend eligibility to housewives and small business owners. However, there may be certain restrictions that depend your occupation or nature of work. When filling out the proposal form, you'll need to provide details about your job.

If your occupation is considered high-risk, the insurer might reject your policy. They include working in underground mines, construction sites, or chemical factories, etc. This decision largely hinges on underwriting assessments.

➡️How Long Can Coverage Last?

Term life insurance isn't just for the short term. Some insurers offer plans with a maximum maturity age of 85 years, while others provide coverage that extends up to 99 or even 100 years. These extended-duration plans are often marketed as 'Whole Life Plans,' ensuring you have coverage for nearly your entire life.

➡️Do You Have Enough Income?

To ensure you can pay the premiums for your term insurance policy, insurers require proof of income. This helps them assess your ability to maintain payments throughout the policy tenure or premium payment term in case you opted for limited pay option. Here are the types of documents you might need to provide -

• Income Tax Return (ITR) for the last financial year or the past 2 years
• Form 16
• Salary slips from the last three months
• Salary certificate
• Employer's certificate
• Audited company accounts for the last financial year
• Latest employment contract letter
• Bank statement for the last six months

Remember, this is a general list. Different insurers might ask for different documents based on your occupation and their specific requirements.

➡️How Healthy Are You?

Your term insurance premiums and the total sum assured depend mostly on your health status at present and any prospective health problems you may have in the future. For this, you will be required to go through a medical checkup prior to being issued a policy. The insurer may refuse to offer a policy or increase your premiums if the results indicate that you pose a higher risk.

Go to Top 🆙

Documents Required For Term Insurance

So, you have figured out that you are eligible to buy term insurance. Now, let’s make sure you have everything you need for a seamless process. But remember that the documents required for purchasing a term insurance policy can vary based on factors such as the insurer, the sum assured, your health declarations, and your nationality. Here are some of the key documents you will need to present -

👉Identity Proof

Your identity is the cornerstone of your application. You can verify it with any of the following -

• Aadhaar card
• Passport
• Voter ID card
• Driving licence
• Authority letter verifying identity

👉Age Proof

Some common documents you can provide for age proof are -

• PAN card
• Driving licence
• Birth certificate
• Passport

👉Address Proof

To confirm your residential address, you might need -

• Ration card
• Bank account statement
• Electricity bill
• Telephone bill
• Voter ID card
• Passport
• Pension order issued by the government

👉Income Proof

Your income details help determine the coverage you qualify for. The required documents differ based on your employment status -

1️⃣For Salaried Individuals:

• Income Tax Returns (ITR)
• Salary slips
• Employer’s certificate (for PSUs)
• Latest employment contract letter
• Income Tax Assessment Order
• Form 16
• CA’s certificate showing income for the past 3 years
• Salary slip and your bank statement for the last 3 to 6 months

2️⃣For Self-Employed Individuals:

• Computation of Income
• Income Tax Returns for the last 3 years

👉Other Documents

Sometimes, additional documents are needed to finalise your application -

• Medical reports (especially if you have a pre-existing medical condition)

Ensure you have the right documents to support your application and address any specific requirements from your insurer.

Go to Top 🆙

Why Must You Get A Term Life Insurance Plan?

Securing the future for your family doesn't have to be unpredictable, even though life sometimes is. Let's discuss the benefits of purchasing a term life insurance plan for protecting your loved ones' finances -

✅Make Sure Your Dear Ones Are Financially Stable

Term life insurance's main goal is to give your dependents financial security. Your nominees will receive a death benefit from the insurance if you pass away, while the policy is in effect. Without worrying about living without funds, they will be able to maintain their standard of living and pay for necessary expenses with this vital support.

✅Enjoy The Advantage Of Low Premiums

Compared to other life insurance options out there, term life insurance premiums are remarkably low. This cost-effectiveness makes it an attractive choice for many, allowing you to secure a significant amount of coverage without putting a strain on your finances. By choosing term life insurance, you can protect your family's future without compromising your present budget.

✅Safeguard Your Family From Debt

Just think. What would happen if you leave behind debts like a credit card, mortgage, or car loan balance? Your family will have to endure financial turmoil while they are already emotionally weak. But with a term life insurance policy, you can ensure that these financial obligations are covered. This means your loved ones won't be burdened with your debts and can continue to live comfortably without the added stress of managing outstanding liabilities.

✅Ensure Income Continuity

For families that depend on a single income or where one partner is the primary earner, term life insurance plays a crucial role. It provides income replacement that helps cover daily living expenses, childcare, education, and other essential costs in your absence. This support is vital for maintaining your family’s standard of living and managing financial responsibilities smoothly.

✅Secure Your Children’s Education & Future Dreams

Every parent dreams of providing the best for their children. From a small toffee to quality education, we only want to give them the best out there. And a term life insurance policy can make that possible. The death benefit can be a crucial source of funds for your children’s education, ensuring they have the resources to pursue their academic aspirations without financial stress. Apart from education, this benefit can also help achieve other significant milestones, like funding a wedding or starting a business. This sets the stage for a bright future.

✅Straightforward And User-Friendly

Term insurance policies are easy to understand. They are free from the complex investment components or cash value accumulation that other insurance products may have. This straightforward approach means you know exactly what you are getting. This makes it easier to manage and ensure the policy meets your specific needs without any hidden surprises.

✅Flexible To Meet Your Needs

The flexibility of term life insurance is one of its biggest advantages. These plans are available in a variety of periods, so you can opt for the one that best suits your budget and financial requirements. Furthermore, a lot of plans allow you to add riders for additional coverage, like disability or accidental death benefits. Aspects like the claim payout, the mechanism and frequency of premium payments, can also be customised.

✅Enjoy The Perks Of Tax Benefits

You may deduct the annual premiums you pay for your policy from your taxes under Section 80C, Income Tax Act. It is important for you to be aware that your beneficiaries' death benefit is tax-free. Because of these tax benefits, term life insurance is a wise investment option in addition to a safety measure.

✅Assurance And Peace Of Mind

Although there are plenty of uncertainties in life, having term life insurance gives you a comforting sense of security. Living with financial security for your loved ones in case of an emergency relieves stress and enables you to concentrate more on your present obligations and aspirations. Because it allows you to appreciate the present without continuously worrying about the future, this peace of mind is invaluable.

Go to Top 🆙

To Wrap It Up,

Just like Iron Man needed his suit for protection, you need term insurance to safeguard your loved ones. Meeting the eligibility criteria is your first step towards this shield. It is simpler than winning an Oscar but just as crucial for your life's script. With a bit of paperwork and the right details, you are all set to be the hero in your family's story, ensuring they are protected no matter what plot twists come your way.

Go to Top 🆙

If you have any further questions related to term insurance eligibility in India, you can post them on the MyInsureBuddy Insurance Forum and get answers from insurance experts within 6-8 hours.