How Much Income is Required to Buy a Term Insurance in India?

After the COVID outbreak, people have become more conscious about purchasing life insurance. Therefore, many want to know the eligibility criteria for a term plan. Finding an answer to whether one’s employment status affects one’s term insurance approval is important as people are often engaged in full-time freelance activities. 

How does income eligibility for term insurance apply to them? 

Please continue reading to learn this and realise the importance of income proof in the term plan authorisation process.

Every time you renew a term plan or even the first time you approach an insurer, the company asks you to provide proof of valid income. If you prefer to keep this information private, the application process will proceed to the consequent steps. 

Have you ever wondered what makes income proof that vital piece of information for an insurer? Well, these are the reasons:

Income Replacement in Case of Insured’s Death

Amount of Coverage Based on Income

Role of Career While Buying Term Insurance

Income Stability

Prevention Against Over-Insurance

In India, no minimum income-related rule barring people from applying for a term plan. However, the insurer will ask for past salary slips if you are a salaried professional.

Also, for self-employed individuals, insurance companies review their bank account details and income tax returns to establish a term cover. Lastly, individual insurers may stipulate a minimum monthly income to ensure their clientele can pay the premiums on time. To find relevant information regarding this, you must refer to their official website or contact customer care by phone.

These are a few requirements that you should meet to become eligible for a term insurance plan:

• You need to be at least 18 years of age. Moreover, many insurance companies set an upper age limit of 65 years. Most importantly, the payable premium depends on the age at which you will apply for a term plan.
• Any term insurance applicant requesting a new policy has to be an Indian or residing in the country during the approval stage. The agreement continues to have the same effect even if you leave India for work or study purposes after purchasing the plan.
• You must undergo a full-body health checkup before applying for a life insurance policy. This step cannot be skipped, as the insurer needs to evaluate your present health status before confirming assured death benefits.
• Your preferred insurer considers your job profile in addition to everything else. For instance, if you belong to a profession with high-risk involvement, the premiums are revised accordingly.

Documents Required

To procure a term insurance policy from one of the reputed insurers, you must produce the following documents:

• ID Proof (Aadhaar Card, PAN Card, Passport, and Voter ID Card): These details are necessary for the insurance company to cross-check the information you entered. Also, in return, they promise to protect you against fraud and identity theft if you cooperate with them throughout the process.
• Permanent Address Proof (Electricity Bill, Ration Card, and Mobile Bill): Similar to ID proof documents, these papers also help you protect yourself from fraud, especially when processing a claim.
• Income Proof: The Past three months' financial documents are accepted as proof of income. These include income tax returns (ITR) for the three most recent assessment years and bank statements from the previous six months indicating your salary.
• Age Proof (Birth Certificate, School/College Leaving Certificate, and Marriage Certificate): Insurance companies ask for this document because premiums depend on your age when you apply. 

Apart from these documents, you must produce your passport-size photographs and most recent medical reports to the company to get the term insurance approved.

ITR, or Income Tax Return, falls under the documents required for term insurance. It can also serve as proof of income for salaried and self-employed professionals. ITR is considered mandatory as it proves that you have a clean and credible source of income.

For most term insurances you must provide income tax returns of the past two years for a smooth insurance approval. Since your income reflects the amount you get as life cover, ITR is a valid form of income.

Here, we have covered the answers likely to subdue your concerns regarding minimum income eligibility for term insurance. Also, many people wonder whether they can get a term plan based on their educational background.

No insurance provider evaluates your educational history before approving your term plan request. You must meet the criteria above and produce the necessary papers to validate your request.