Should You Buy a Term Insurance Plan in Your 50s?

Written by : Knowledge Centre Team

2021-04-08

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Imagine if the old car you bought in your 40s is outdated, or you need another car for the convenience of your family. Would you hesitate and avoid buying a new car? Possibly not, especially when it is a need rather than a luxury.

The same happens with a life insurance plan, especially something as important as a term insurance plan. However, the challenging part with term insurance is identifying the need for it as and when it arises.

You can very easily identify the need for a new car, home repair and other such expenses in life. But you need some extra effort to recognise the term cover need and when exactly do you need it.

Do You Need a Term Life Cover in Your 50s?

Term life insurance coverage helps you provide your dependents with a financial umbrella, in the case of your early demise. Meaning, if you can no longer take care of their future and financial needs, term cover will at least ensure sustenance for their lifestyle.

So, you will need a term insurance cover in your 50s if any of the following are true for you:

Children are financially dependent on you
You expect to continue working post-retirement age
Have a loan that will continue well past your retirement
Want to leave a legacy for your grandchildren

If you are in your 50s right now, most likely you have fulfilled almost every financial goal of your children and now preparing for a relaxed retirement. However, it is also likely that you never had a term insurance cover.

Buying Term Cover Early – Why is it Necessary?

Ideally, the best time to buy a term cover is when you start earning. After this, you only increase your cover as your responsibilities grow until you retire. But in case you did not buy the life cover then, the second-best time is now, and here are the reasons:

Your family and dependents are more financially vulnerable in the early days of your career
Lower premium cost: The premium rises based on your age and remains the same throughout your lifetime. Thus, buying at a young age saves a lot of money for you.
The increment is Easier: If you buy term insurance plans like iSelect Smart360 Term Plan from Canara HSBC Life Insurance, you can increase the cover under the same plan. This plan allows you to increase your life cover upon certain life events, like marriage, childbirth, house purchase. Such increment has a lower cost in term of both money and effort.

What is the Correct Age to Buy Term Insurance Cover?

The correct age to buy a term cover is any time after you have reached the age of 18 or when you start earning. With term insurance cover only two factors are important for eligibility:

You have attained the majority
You have an income from any source, such as interest, rental, dividend, business, employment, etc.

Rest you can have dependent parents, spouse, children or anyone else for whom you are an acting guardian. A term insurance cover should help any of them live out their lives at least as well as they were when you were there to provide for them.

How Much Term Cover Should You Buy?

The amount of life cover in your term insurance plan should be large enough to provide for the following needs of your dependents:

Living and kitchen costs
Paying-off any ongoing loan or mortgage
Meeting the cost of the important future financial goals

Thus, the term insurance cover should not only safeguard your family’s future goals but also lifestyle and liabilities. Usually, 15 to 20 times your current annual income is enough to take care of all these financial needs.

However, there is more to meeting these needs than is visible in these three needs. Consider the following:

Loans are the Easiest
Paying-off loans and mortgage only require paperwork and effort. It is a one-time financial exercise, i.e., you do not need to estimate anything, once you pay it off, it is over.
Goals need Investing
Using the money received from the term insurance policy to invest for long-term goals could be a tricky maze to cross. This is especially difficult for novice investors, and they would want to play it safe. However, very few safe investments offer tax benefits and liquidity.
The Toughest part - Managing Lifestyle
Lifestyle expenses even if minimalistic need regular income. While you are alive your family can easily budget their expenses based on the monthly input you provide.

However, this decision is difficult when they face a large pool of finite money available for the entirety of time. Withdraw too much and they risk emptying the pool too soon, withdraw too little and their lifestyle suffers.

Thus, the best thing is if you can decide this part beforehand.

So, whether you are buying a term cover in your 50s or 30s, the basic principles of selection remain the same. Identify your need and protect your family financially from mishaps you have no control upon.