Term Insurance Benefit For Senior Citizens

As we near the 'golden years' of our lives, securing the future of our loved ones becomes the single most important priority. This may involve proper financial planning, estate planning and getting insurance coverage on lives of major earning members in a family. Though people often associate life insurance with youth, term insurance for senior citizens can be a crucial element of financial plans for people in their 50s and 60s. This article discusses everything you need to know about term insurance suitable for senior citizens. Let us start with the basics. 

Importance of financial planning for senior citizens

Financial planning is a systematic practice of creating a practical plan of action to achieve future money goals based on a comprehensive evaluation of currently available financial variables, like the flow of income, expenses, liabilities, etc. People in the age groups of 20 to 40 have clear financial goals, like buying homes and cars, planning vacations, retirement savings or saving for children's education. Financial planning helps them allocate, save and invest to achieve these goals.

Similarly, some of the common financial goals for senior citizens are:

• Financial safety for dependent family members 
• Covering costs of critical illnesses 
• Ensuring financial endowment for future generations 
• Clearing debt obligations in case of their demise
• Managing income tax 

Effective financial planning can help senior citizens (people in their 60s and above) to take care of these financial obligations and money goals. 

Role of term insurance in providing financial security

Based on the value of the sum assured (SA), death benefit from term insurance can act as a significant tax-free financial safety net for the nominees of the insurance plan. In term insurances with the return of premium at maturity feature, the insurer company returns back the total premium paid during the policy period once the policy matures. It serves as a lump sum post-retirement tax-free income for senior citizens and their family members. Either way, term insurance ensures financial security for the elderly population.   

Understanding Term Insurance

Term insurance is a type of life insurance plan, but it is much more affordable than conventional endowment policies, unit-linked plans or money-back policies. Usually, insurance companies offer term insurance plans in fixed tenures like 10, 20 or 30 years. Policyholders pay a recurring premium for a fixed premium payment period. Some plans offer one-time premium payment options. 

After the demise of the policyholder, the insurance company pays the Sum Assured under the term insurance policy to the nominee or nominees mentioned in the term insurance policy document. SA is paid only on the demise of the policyholder. If a policyholder is alive and the policy matures, the insurance company does not pay any sum assured.  

For plans with Return-of-Premium (RoP) features, insurance companies pay back the entire premium amount paid by the policyholder after the end of the policy period, even if the policyholder is alive. However, RoP plans may charge a little extra premium compared to regular term insurance plans. 

Some of the unique benefits of term insurance for senior citizens are:

• Affordable premiums compared to whole-life policies - term life insurance is the most affordable compared to all other types of life insurance coverage. So, a policyholder can add life cover to the financial plan at the least minimum costs. 
• Financial protection for dependents - These policies protect dependent family members from financial debacles following the demise of the major earning member. 
• Coverage for outstanding debts and liabilities - Death benefit from a term insurance policy can help pay back loans without causing a financial burden to family members. 
• Tax benefits on premiums and payouts - The minimum income tax slab for senior citizens above 70 years is up to ₹3 lakhs. Term insurance for senior citizens can help anyone earning more than the minimum slab save up to ₹54,600 every year u/s 80C and 80D.   

Definition and key features of term insurance

Any term insurance policy comes with various features catering to different sets of needs and circumstances. To make the right purchase decision, you must understand the definitions of these key terms and features. 

• Death benefit: This is the core concept for any term life insurance plan. It's the amount that the insurance company pays to the nominees or policy beneficiaries if the policyholder passes away during the policy term or policy period.
• Policy term: Policy term refers to the length of the time (for example, 5 years, 10 years, etc) during which a life insurance policy remains active. In this period, if a policyholder dies the insurer pays the assured death benefits. Some of the standard policy terms are 10, 20, or 30 years. Many insurance companies offer term insurance for senior citizens with policy terms up to 99 years of age of the insured person. 
• Premium: It is the regular amount that a policyholder needs to pay to the insurance company to keep the term life insurance policy active. Premiums can be paid monthly, quarterly, annually, or as a lump sum.
• Beneficiary: These are people who receive the death benefit under the term policy in case of the demise of the policyholder. 
• Riders: These are optional features, like additional coverage, critical illness benefits, and accidental death benefits, that policyholders can add to their policies.
• Convertibility: It is an option to convert a term insurance policy into a permanent life insurance policy without requiring medical examinations.
• Renewability: Such a feature allows policyholders to renew their term policies at the end of the policy term. It may require paying premiums at a higher rate. 
• Exclusions: These are special circumstances, like unnatural death, under which an insurance company may refuse to pay the death benefits to the policy beneficiaries. 
• Grace period: It is the period after the actual premium due date during which the policy remains active (does not lapse), if policyholders delay paying premiums. 
• Free look period: During this period, after the purchase of a term policy, the policyholder can cancel the policy if not satisfied and still get a full refund.
• Contestability period: This is the period during which an insurance company can deny a claim if it discovers fraud or misrepresentation of facts by the policyholder. 

Differences between term and whole life insurance

A whole life insurance plan covers a policyholder throughout his or her life if the policy remains active. Unlike term plans, whole-life policies do not have a fixed policy term. Besides, such a policy also has a cash value. So, these insurance policies can act as investments. 

This means the insurance company invests a portion of the premiums policyholders pay for whole life insurance plans. After a fixed period of premium payments, policyholders can access such accumulated sums during the policy term as a loan against the policy. At the policy maturity, the insurance company pays back the sum as the policy's cash value. In case of the demise of the policyholder, the insurance company pays the death benefit and the accumulated cash value. 

Term insurance plans do not act like investments, as they do not have cash value. RoP plans returns on the premiums paid without any additional returns on that amount.  

Suitability of term insurance for seniors

As per the Insurance Regulatory and Development Authority of India (IRDAI) guideline, the maximum age limit for term life insurance is 65 years. However, some insurance companies offer plans for senior citizens of up to 70 years of age. 

Depending on the financial planning, term insurance can be very suitable for senior citizens while they are in their early 60s as it may cost less premium.  

Factors to Consider When Choosing Term Insurance

While choosing term insurance, you must consider a few factors or find answers to a few questions. They can help make your decisions easier. 

1. Coverage amount and policy term

What is your current level of income? How many people are dependent on you financially? Do you have any specific financial goals? How old are you? Ideally, the coverage amount should match 10 to 15 times your annual income. For example, a senior citizen earns ₹5 lakhs annually and has 2 dependent family members. So, the term insurance sum assured for the person will be ₹50 to 75 lakhs. 

2. Health status and medical underwriting

Medical underwriting involves the evaluation of the medical condition of the person to be insured for his or her life. The cost of the policy premium depends on it. An insurer can refuse to underwrite or approve a life insurance policy for a person with terminal illness. Similarly, persons with poor health may be required to pay an excess premium compared to people with sound health. With increasing age, people become prone to health issues. So, medical underwriting of term insurance for senior citizens can be a significant step. So, if you are in your 60s and wish to purchase term insurance, do so while in good health.  

3. Premium affordability and payment options

Term insurance for senior citizens is a niche financial product, and the costs of premiums may vary significantly from one insurer to another. So, it's important to check the cost structure of the policy from different insurance companies and compare them. The premium of a term life insurance policy is a combination of mortality charges and expense factors. Mortality charge is the actual cost of insuring the life of a policyholder, and it mostly remains similar for a specific age group, health profile and sum assured. However, the expense ratio may vary with companies.  

4. Insurer's reputation and claim settlement ratio

The claim settlement ratio indicates how many life insurance claims an insurer approves and settles out of the total claims received. It can help policyholders understand the trustworthiness of an insurer. Any top life insurance company in India maintains a claim settlement ratio of 99% and above. 

Top Term Insurance Plans for Senior Citizens in India [2025]

We have shortlisted a few of the top term insurance plans suitable for senior citizens in India in 2025 as per maximum entry age and maturity age. 

1. Canara HSBC  iSelect Smart360 Term Plan

Key features and benefits

• Claim settlement ratio 99.23%
• Life coverage till 99 years of age
• Option to get a return of total premiums
• Add-on riders 
• Maximum SA - no limit
• Minimum SA - ₹25 lakh

Eligibility criteria

• Maximum entry age 65 years 
• Maximum maturity age 99 years (80 Years for Single Premium policy)
• Medical investigation 
• Income proof
• Indian citizenship 
• Age proof 

Premium details

• Single pay (Not applicable for Maturity Age > 80 Years)
• Regular pay
• Limited pay (5/10/15/20/25 years) 

2. ICICI iProtect Smart 

Key features and benefits

• 99.17% claim settlement 
• Accidental death benefits 
• Terminal illness cover 
• Premium guarantee (remain same throughout the policy period)
• Option of life cover till 99 years 
• Coverage of up to 34 critical illnesses 
• 10% discount on online application 

Eligibility criteria

• Similar to other term insurance 

Premium details

• Similar to other term insurance 

3. HDFC Life Click 2 Protect 

Key features and benefits

• Claim settlement ratio of 99.5% 
• Same-day claim settlement 
• Protection against accidental death and disability 
• Option to increase coverage during the policy period 
• 7% discount on online applications 

Eligibility criteria

• Same as other term insurance 

Premium details

• Same as other term insurance 

How to Apply for Term Insurance as a Senior Citizen

For applying for term insurance as a senior citizen, you can consult insurance advisors or go through the following steps yourself: 

• Assessing insurance needs and financial goals - Calculate total yearly regular income and multiply the same by 10 to 15. This provides the sum that nominees will get in case of a policyholder's death. Add monetary values of other financial goals, if any. The total value will be the ideal sum assured needed.  
• Comparing plans and premiums - Once you are sure about the sum assured you need, check the websites of multiple insurance companies or insurance evaluation portals. Check premiums for plans of different companies. 
• Undergoing medical examinations, if required - Term insurance for senior citizens requires submitting a health status report. Go through the health check as per the insurance company's requirements. 
• Completing the application process - Any top life insurance company allows applying for term insurance online. Visit the website of your chosen insurance company, follow the instructions and upload all the documents. 

Common Myths and Misconceptions

Despite the unique advantages of term insurance for senior citizens as financial protection, several myths and misconceptions often cause confusion. Some of these misconceptions are:

• Term insurance is too expensive for seniors - Premium of term insurance increases with the policyholder's age. However, with the right financial planning and a cautious approach to choosing the right policy, the benefits may outweigh the costs significantly. 
• Seniors cannot get term insurance due to age - An increasing number of insurance companies offer term insurance for senior citizens. Many such term policies offer life coverage up to 99 years with a maximum entry age of 70 years. 
• Limited benefits for senior policyholders - It is true that not every aged person needs life insurance coverage. However, many people in their 60s may have unique financial needs for such coverage. For them, term insurance can offer significant benefits. 

Conclusion

When the concern is about securing the future of loved ones after the demise of the major earning member of a family, term insurance can offer unmatched benefits. Additionally, for anyone with annual taxable earnings above the minimum income tax slab for senior citizens above 70 years, term insurance can save up to ₹54,600. So, check your financial plan today and estimate the amount of life insurance coverage you may need to secure the future of your family members.