Can Term Insurance Be Purchased Without An Income Proof?

A term plan is a form of life insurance policy that offers complete financial protection for a set period of time in exchange for a premium. It protects you against death. If the policyholder dies before the policy period ends, the insurance company pays the beneficiary the death benefit. The policyholder, on the other hand, does not receive a survival benefit if they surpass the policy term. When you buy a term plan, just like any other type of insurance, you must complete the documentation process. Although the procedure varies depending on the insurer, most insurance firms ask policyholders to submit some important documents.

Documents Required to Purchase a Term Insurance Plan

Here is the list of necessary documents that must be submitted to buy term insurance

• Passport-size photographs 
• Identification proof (Aadhaar card, passport, driving licence, voter ID card, PAN card, ID issued by a government body)
• Proof of address (Aadhaar card, ration card, recent utility bills, passport, bank account statement, letter from a recognised public authority, driving license)
• Medical Reports 
• Salary slips, bank account statement displaying salary credit, business account statement, current account statement, ITR/Form 16 are all acceptable forms of proof of income.

Can Term Insurance Be Purchased Without An Income Proof?

No, you cannot buy a term insurance policy without any proof of income. It's crucial for financial underwriting. Insurance companies decide the life cover they can offer equivalent to a certain premium amount based on the extent of the policy buyer's income.

Why is Income Proof Important?

For financial underwriting, insurance firms require proof of the applicant's income. These documents are scrutinised by insurers for the following reasons.

• The insurance firm uses income proofs to determine the sum assured or total life coverage that can be provided to the applicant. It also helps them in determining the policy's premium rates.
• Based on the documents you present as proof of income, the insurance company assesses the risk and your capacity to pay the premiums on time.
• It eliminates the risk of over-insurance, which occurs when the insured purchases more coverage than the real cash worth. This could be a risk for the insurance company, and it could also result in a claim denial.
• The policy may lapse if there is a mismatch in the income statement, and an insurance claim may be denied. You can avoid this by submitting proof of income when getting term insurance.

Take Away

When purchasing a term plan, make sure you follow the documentation instructions carefully and have all of the essential documents with yourself ahead of time to avoid last-minute difficulties and delays in the application process. It is impossible to obtain term insurance without proof of income because the applicant's income is one of the key factors used by the company to determine whether or not to grant the insurance. As a result, you must have proof of income while applying for term insurance.

Also read - Does It Make Sense for You to Buy a Joint Term Life Cover with Your Spouse?

Monthly vs Lump-sum Pay-out in Term Insurance

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.