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Eligibility Criteria for Buying Term Insurance in India

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Eligibility Criteria for Buying Term Insurance in India
October 15, 2024

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The pandemic has taught us how uncertain life can get. Thus, all of us these days are a little more worried about the financial security of our loved ones if something unfortunate happens. Term insurance plans, including the best term insurance plan for 1 crore, can put a stop to this stress, providing solid support to your family in case you are not around anymore.

What is Term Insurance?

Term insurance is a protection plan that provides the family with a lump sum payout if the policyholder dies untimely within the policy term. This money can support them to fight this sudden turmoil, help them in paying for their regular expenses as well as liabilities, maintain the preferred living standard and fulfil their life goals.

Who is eligible to purchase a Term Plan?

Anyone who is of legal age and has dependants can buy term insurance in India. If your loved ones depend on you financially, the term insurance payouts will help them. However, even if you don’t have dependants now, but could likely have some in the future (for example, if you marry and have children), it still makes sense to buy term insurance beforehand. It's essential to assess how much term insurance do I need to ensure your coverage is adequate. It’s better to understand the eligibility criteria clearly.

  • Term Insurance for NRIs:

    If you are a Non-Resident Indian (NRI), you can also get a term insurance policy in India. The eligibility criteria for NRIs are quite similar to those for residents, with the additional necessity of submitting acceptable proof of residential status. The coverage and benefits remain the same, and NRIs can select from a variety of amount assured alternatives, including high coverage plans such as one crore. This makes term insurance an excellent choice for NRIs looking to financially secure their families back in India.

  • Age: 

    One can buy a best term insurance plan in India if they are in the age bracket of 18-65 years.

    However, it is possible to buy a term plan at 65 years of age and opt for life cover up to the age of 99.The age of the policyholder is a crucial factor in premium calculation.

  • Citizenship:

    Anyone residing in India can buy term insurance. The term insurance eligibility remains the same if he shifts abroad for academics or work purposes after the purchase.

  • Medical tests:

    To purchase term insurance, one needs to undergo medical tests. It’s important to furnish the medical history and records correctly, which plays a significant role in deciding the premium amount. Medical tests for term insurance during the purchase help both the insurer and the insured as it determines the substance and value of the policy plan. However, it is not a mandatory requirement. There are term insurance policies that do not require any medical tests, but these could often offer a lower sum assured.

  • Lifestyle habits:

    Lifestyle behaviors including smoking, level of stress and sleeping patterns of the term are determinants insurance premium. Premium will be higher if you are a smoker or live a stressful life. Some of these stressful life factors include adventurous / hazardous sports which pose a risk to life or those who work in a hazardous environment and are subject to high stress levels.

Acceptable Identity Proofs and Residence Proofs:

To purchase term insurance plans in India, you need to submit a set of documents. These are required to cross-check your identity and residential address as well as to protect you from fraud and identity theft. Let us check which of the identity and residence proofs are acceptable by the insurance companies.

  • Identity proofs:

    Any of the following official photo ids can be submitted as identity proof -

    1. Passport

    2. Voter’s identity card issued by the Election Commission of India

    3. Permanent Driving License

    4. Aadhaar Card

    5. Central KYC Identifier (can be accepted, if the downloaded documents are from the list of Officially Valid Documents (OVD) reflecting across Sr. No. 1 to 4 and there is no change in the address basis the document downloaded from Centralized KYC Registry (CKYCR) database as mentioned on the proposal form)

  • Residence proofs:

    You can provide any of these as the official proof of your permanent address –

    1. Passport

    2. Voter’s identity card issued by the Election Commission of India

    3. Permanent Driving License

    4. Aadhaar Card

    5. Central KYC Identifier (can be accepted, if the downloaded documents are from the list of Officially Valid Documents (OVD) reflecting across Sr. No. 1 to 4 and there is no change in the address basis the document downloaded from Centralized KYC Registry (CKYCR) database as mentioned on the proposal form)

Who should purchase a term insurance plan?

Anyone can buy a term insurance policy, according to the product's terms and conditions. For instance, at the age of 65, you can purchase a term plan with life insurance coverage until the age of 99. There is no set income restriction for the same. However, it’s important to know who should purchase a term plan and what can be benefitted maximum. While the list below is not exhaustive, it is indicative of persons who can benefit from a sound term insurance plan.

  • Individuals with dependents:

    If you have a spouse, children and/or dependant parents, buying term plans can be a wise idea. In case the unforeseen happens, your family will receive the sum assured which they can utilise in paying for all the expenses, cost of living, and liabilities and to realise their life goals.

  • Sole earner of the family:

    If you’re the primary or sole bread-earner of the family, it can be really difficult for them to cope with the financial struggles if you are not there anymore. Here the death benefit of term insurance can help them stay afloat.

  • Individuals with outstanding liabilities:

    If you have a mortgage, an outstanding loan, debts or any other financial liability, they can be a burden for your family if you die suddenly. The term insurance can be a saviour here with its death benefit paying for all the financial obligations.

  • Young adults:

    Those who have recently begun their careers can easily get term insurance. This will be an excellent investment opportunity to secure their family at a reasonable cost. Young customers pay substantially cheaper premiums since they are at a lesser risk of death.

  • Self-employed:

    Since the self-employed have an uncertain income profile, it’s always beneficial for them to buy a term insurance plan. This will not only protect their family in case of an unfortunate event but save their business too.

  • Those looking for a smooth life:

    Term insurance is a basic and easy protection plan at a reasonable price. Thus, it is a preferred choice for those eyeing a simple and affordable life.

Why should you get a term insurance plan? 

It’s crucial to know the importance of a term insurance plan and why you should get it.

  • Financial protection for loved ones:

    The primary reason to buy a term plan is surely the financial protection it offers to your family if you die an untimely death. The death benefit can help your family pay for the cost of living, and all the outlying financial obligations as well as meet the life goals smoothly.

  • Affordable coverage:

    Term insurance premiums are usually lower than other insurance policies andprovide you with an affordable life cover. This is possible because it typically pays the death benefit only and is hence a popular choice for those with limited budgets.

  • Flexibility to choose coverage amount and duration:

    A term insurance plan lets you choose the life coverage amount and tenure of the policy as per your budget and convenience of premium payment. This makes it easier for most people to opt for the policy.

  • Peace of mind:

    A term insurance plan relieves you from the stress of the financial hardship you might face if something happens to you. It is therefore a peace of mind that your family will stay protected even if you are not around.

  • Easy to understand:

    A term insurance policy is very basic with straight benefits and no hidden costs. Thus, it’s relatively much easier to understand.

Understanding the term insurance plan well can help you take an investment decision correctly. Make sure you have all the clarity before buying one.

FAQs on Eligibility Criteria for Buying Term Insurance in India

Q: When should I buy a term insurance plan?

You should ideally buy a term plan as early as possible, such as in your 20s. The later you buy term insurance in life, the higher your premium cost is likely to be. And the younger you are, the lower your premium is likely to be.

Q: What is the eligibility of term insurance?

The eligibility criteria for term insurance tend to vary from one insurer to another insurer, but usually include age, income, citizenship proof, medical examination, identity proofs, etc. If you fail to meet any criteria, such as your age does not fall into the usual bracket of 18-65 years, or you do not clear your medical tests, you may not be eligible for term insurance.

Q: What is the eligibility for 1 crore term insurance?

The general eligibility criteria are similar for insurers, including age bracket, citizenship, minimum income, medical tests, etc. But if you are aiming for a Rs 1 crore term insurance cover, you need to ideally have at least Rs 10 lakh annual income since term insurance covers amount to Rs 10-15 times your annual income. However, as the eligibility criteria differ across insurers, check and enquire with the insurer when planning to buy Rs 1 crore term insurance.

Q: What is the minimum income required for term insurance?

The minimum income required to buy term insurance would vary across different insurers. However, there may often not be any minimum income requirement for a term insurance plan, as you would be eligible for a cover amount of around 10-15 times of your annual income. So, if, for instance, your annual income is Rs 5 lakhs, you may avail Rs 50 lakhs term insurance cover.

Q: Who can not buy term insurance?

If you fail to meet the eligibility criterion of an insurance company, such as the age bracket, citizenship proof, medical examination clearance, identity proofs, etc, your term life insurance application will likely to be rejected. For instance, if you do not fall into the usual age bracket of 18-65 years, you may not be eligible for term insurance.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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