Experts usually recommend taking a Term Insurance cover till you turn 65, which is the standard age of retirement. By this age, it is assumed that you have fulfilled all responsibilities towards your family, repaid your major liabilities, and accumulated a sizeable financial corpus to take care of your family’s living expenses for the rest of your life. While the retirement age of 65 holds true for people retiring today, the pace at which the world has been changing in the last decade, the standard retirement age and hence the coverage duration may not be relevant for everyone and may call for a review. Here’s why:
You do not want to retire at 65:
Amitabh Bachchan is 76 years old, and still works as hard as people 20 years younger. If you are one of those who would like to work all of your life, or you are a self-employed professional looking to continue your practice till you can, the age of 65 may not mark the end of your term insurance plan. The availability of limited pay options also makes it easier to buy longer term insurance plans. Earlier, with only regular pay options available, people could not choose to cover themselves beyond 65 years, as making regular premium payments would be a question mark. Now, you can opt for limited pay. So, you pay premiums for a shorter term, and get a longer duration cover. For instance, you can complete all your premium payment by the age of, say, 50, and opt for a cover up to the age of 99 or 100.
Average age of marriage has risen
Young and educated families in urban areas are usually in the nuclear format. With no extended family to lean on, today’s youth want to ensure a financially independent life before they settle down. The average age of marriage has clearly increased from the mid-20s to the late-20s. Obviously, the age before which people choose to become parents is pushed up by around 10 years. Now, if you got married in the early 30s, or you have become a parent in your late 30s or early 40s, it is recommended that you have a cover till you turn 70-75, to ensure your family is insulated from any major expenses or liabilities.
Increased healthcare expenses
While the ever-improving medical science may help us to live longer, given our rather sedentary lifestyles, we are likely to face multiple medical conditions, even serious ones, making long-term healthcare expenses a major concern in the future, despite having a high- value health insurance cover. For instance, if the average annual healthcare expenses in a metro city for a senior citizen couple is in the range of Rs 3-5 lakh for, say, the next 20 years. Factoring inflation and increased health issues, this expense is likely to increase to around Rs 15 lakh for a longer duration of around 30 years post your retirement. The aggregate medical expenses are likely to be four times today’s expenses, increasing your estimated living expenses post-retirement exponentially. This will either curtail your living standards, or force you to work well beyond your estimated retirement life.
Low-cost legacy planning
Beyond living a comfortable retirement life, many of us want our families to enjoy a great life, and hence plan to leave a financial legacy. People evaluate multiple long-term investment options. Very recently we have seen Term Insurance cover being appraised as a low cost, tax-free legacy planning investment option that practically assures a fixed corpus irrespective of the age of death. For instance, Rahul, 40 years buys a term insurance policy that covers him for Rs 1 Crore up to the age of 100. Now, if Rahul passes away at the age of 75, he will leave a tax-free corpus of Rs 1 crore for his children by paying just Rs 8.36 lakh, giving a lucrative rate of return of 11 per cent on the investment.
Please find some more calculations for a 40-year-old male, non-smoker for a cover of Rs 1 crore up to age of 100:
In case you are looking for a long term insurance policy that can serve as an attractive legacy planning investment, it may really make sense to buy a term cover beyond the age of 65. Limited pay options make it even easier.
(The writer is Director - Health, Life & Strategic Initiatives at Coverfox)
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