How Term Insurance Can Be an Important Element of Retirement Planning


The life expectancy rate in India has increased in the last few years. This means that. individuals, on average, will be living longer lives. The availability of medicines, healthcare, better standards of living, and many more factors may be the reason behind the increased life expectancy. However, this also means that one has to take care of finances for a longer period of time now. Retirement planning is a vital element in managing one’s finances. Buying an online term plan may not seem like the most effective way of planning for retirement at the first glance. But, with a little more understanding, term insurance can help check off several things on your retirement planning to-do list. Let’s understand how.

What is a term plan? 

Let us first understand briefly how a term insurance plan works. Term insurance is a product in which you pay premiums regularly and get life cover for a fixed period. If you pass away during this time, your loved ones receive the sum assured. This is how a basic term insurance policy works. The sooner you buy an online term plan or an offline one, the better it is, as the premiums are lower for young people. There are various features of term insurance that can help you tremendously in your golden years.

How to maximise term insurance features for retirement planning 

Opt for the return of premium feature 

Usually, term insurance does not offer any benefits if you outlive the maturity of the plan. However, if you opt for the return to premium feature, you receive the totality of your premiums paid till then if you survive the policy’s maturity. This helps hit two targets with one stone – your family’s future is secured in case of an unpredictable event and in the fortunate event that you survive, you get all the premiums back. This lump-sum benefit pay-out can act as an essential savings element for your retirement years.

Consider opting for an increasing term insurance plan 

One important aspect that one must remember when planning for retirement years is the rate of inflation. If you are somewhere around 40 years old now, the prices of everyday items are going to increase at a high rate by the time you are 60 years old. When you buy an online term plan with the increasing sum assured feature, you can choose to raise the sum assured of your term plan at certain time periods during your term insurance tenure. The increase usually happens at pre-determined- rates and can help you combat inflation easily.

An increased sum assured may also be required if you move abroad during the tenure of the plan. If you are wondering whether your term insurance is valid abroad or not, then the answer is, yes, it is.

Take advantage of riders 

Term insurance has several riders that can help you achieve newer levels of financial protection in your golden years. Senior citizens are more prone to health issues due to reduced immunity. The risk of serious, life-threatening illnesses and surgeries is also quite high. This can put a huge dent in one’s finances. Therefore, you should consider opting for the critical illness insurance rider, which provides a lump sum amount on the diagnosis of a covered illness.

You can also opt for the waiver of premium rider. This one cancels all future premium payments if you are diagnosed with a critical illness or undergo an accident, resulting in consequences covered by the policy. Your term insurance is valid abroad, but certain riders may not be. Do talk to the insurer about this if you plan to move to a foreign country before your retirement.

Buy term insurance early 

As mentioned earlier, the sooner you buy term insurance, the better, since younger people incur lower premiums. Besides the lower premiums, you also get to accumulate a large premium lump sum, which can help you immensely during retirement.

Now that you know what a term plan is and how it can help during retirement, we hope you start on the term journey soon! With the right mixture of term insurance and other financial instruments, you can have a smart retirement planning portfolio and even more fruitful retirement years.