If you have already read my previous articles on Term Insurance modules, you must be already aware about the need for Term Insurance and the amount of coverage you will require. The obvious follow-up question that you would have thought of is – Till what age should I buy a Term Insurance policy? Should it be till age 50/60/70/75/85 or 99 years?

If you are looking for a one-word answer for an ideal age till when coverage will be needed, the answer would be – 60 years.  This age is considered as normal retirement age for any person working in India.

However, if you do plan to work beyond 60, then you can opt for the age where you do plan to retire. This can always be rounded off to the nearest age bracket that you intend to work. For example – Most Doctors continue to practice and treat patients beyond the  age of 60.  In such cases, they can opt for term insurance coverage till age 65/70.

Note: If you can generate the required assets prior to your retirement age, you can terminate your term policy. For example – You had planned your retirement at 60 but you were able to accumulate the required assets by the age of 50. In this case, you can stop your term insurance policy at the age of 50.

*Required assets mean the amount of money required to achieve your financial goals including retirement, children`s education, marriage, house purchase, vacation, etc.

There are some exceptional scenarios too where you can buy term insurance cover beyond the age of 60. I will explain these towards the end of this article.

Why are people keen to purchase Term Insurance cover beyond age 60?

When we are aware that term insurance is typically required till the age of 60, why are people still keen on purchasing term insurance cover beyond the age of 60? There are 2 reasons behind this and the reasons are more psychological than financial.

  1. Legacy – Death is certain and everyone one of us will die one day. What is the harm if my children/spouse can benefit from it and get additional money (1 Crore/2 Crores or whatever the cover is) if I die after age 60 as part of my legacy?
  2. Returns – Most of us are concerned about returns on our investments. If I do not die till the age of 60, I will not get any amount that I had paid as part of the coverage premium back. What is the harm in paying an additional premium and ensuring that my children/spouse will get term insurance money (1 Crore/2 Crores or whatever the cover is) if I am not going to get anything back in my lifetime?

This is the basic underlying psychology of investors when they decide to purchase term insurance coverage beyond the age of 60.

It is very difficult to change this psychology of investors and it will take a long time and a lot of effort to bring a change to this mindset. To simplify the process, let me explain the financial side of it i.e. Why does it not make sense from a financial perspective to purchase term insurance coverage beyond 60?

Firstly, let us discuss on why term insurance is only required till the age of 60 and not beyond

In India, the retirement age is assumed to be 60 (though this scenario is now changing) and by the age of 60 you will not have dependents.

No Dependents – One of the key reasons for buying Term Life Insurance is to secure the financial future of your dependents in case of any unfortunate event of death of the earning member of a family.  You may have dependents like your spouse, children, or elderly parents who are financially dependent on you while you are working. However, by the age of 60, this dependency changes, especially with respect to your children based on the assumption that they will be self-sufficient and you don’t need a term insurance policy for their protection. At the same time, you accumulate required assets for your retired life by the age of 60 and you don’t need a term insurance policy for your spouse’s financial protection.

Premium – Once you are retired, your children may have to pay the term insurance premium on your behalf, if you have not provisioned this expense in your retirement planning. Thus, continuing the policy beyond 60 is not cost-effective. There are many insurance companies that are giving you the option of paying premiums till the age of 60 and providing coverage till the age of 85.  However, this is also not cost-effective.

Legacy and Returns

The sudden increase in popularity of term plans that provide coverage till 85-90 years is the result of an aggressive marketing strategy followed by insurance companies and web aggregators.

I have started seeing one such advertisement on my Facebook feed for a long time. Here’s how the advertisement goes –

“Leave the legacy for your child. Buy term insurance cover of 1 Crore at just Rs. 2000/- per month for 85 years.”

Such advertisements often make you ponder that leaving 1 Crore for your child does not seem to be a bad option, isn’t it?

Firstly, let me clarify that this insurance plan isn’t as great as it looks. In fact, with such a plan, there’s no way you’re going to leave a legacy of 1 crore for your child.

It is essential to understand the time value of money. The value of 1 Crore in present time will not be same in the future. For example, you can easily buy a flat within 1 Crore in today’s scenario. Nevertheless, the same amount of 1 Crore may not even be enough to purchase a basic car after 40-50 years.

Taking today’s trend of inflation into consideration, let’s see what will be the value of 1 Crore after 40-50 years.

Today`s Value 1 Crore
Inflation 6%
Value after 40 years 9.7 Lakhs
Value after 50 years 5.4 Lakhs

Suppose your current age is 30 years and you take a term insurance plan that provides coverage till 80 years for 1 crore. The value of 1 Crore would be 9.7 Lakhs after 40 years i.e. when you are 70 years old and 5.4 Lakhs after 50 years i.e. when your age is 80 considering an average inflation rate of 6%. Do you think this is the kind of legacy you want to leave for your children?

Returns

Now that you have understood that such long-term insurance plans will not yield any results in terms of leaving a legacy for your kin, let’s look into another important aspect which is Returns.  Here are some calculations to ascertain- Why term insurance plan till 85 years is not beneficial?

If you’re 30-year-old and want to buy a sum assured of 1 Crore, there can be 2 options.

  1. Term Insurance till the age of 60 i.e. your retirement age
  2. Term Insurance till the age of 85 years

Now let’s compare the premium that you need to pay for both these plans.

I am considering an example of ICICI Pru Term Plan which offers coverage for up to 60 and 85 years.

1st case: Premium for 30 years i.e. till the age of 60 years (Term – 30 Years) – Rs. 13,392 per year

2nd case: Premium for 55 years i.e. till the age of 85 years– Rs. 25,888 per year

Total difference in the Premium for these two plans – Rs. 12,496 per year

To make it easier to understand, let’s consider 2 distinct scenarios here:

  1. Death before the age of 60
  2. The person survives beyond 60 years

Scenario I – Death Before The Age Of 60

If a person buys a term insurance coverage till age of 85 years and if he dies before the age of 60, he will undoubtedly lose some money.

Suppose a person dies at the age of 55, he will lose out on the additional premium amount that he’s paid which is 12,496 per year i.e. 3.12 Lakhs in 25 years if he had opted for a term insurance plan that provided coverage till the age of 85 years.

Scenario II – Survival Beyond 60 Years

What would happen if a person survives beyond 60 years and invests Rs. 12,496 per year? Will he still gain if he lives till the age of 75/80/85 years?

Let’s assume that this person lives till 75 and invests that surplus amount of Rs. 12,496 per year.  By the age of 75, this investment value would be around 2.19 Crores if we consider 12% returns.

How?- Pls find below the table –

Download Calculator – Till what age should I purchase term insurance

Age Premium for 30 years policy Premium for 55 years policy Difference in premium Returns at 8% Returns at 10% Returns at 12%
30 13392 25888 12496 ₹ 13,496 ₹ 13,746 ₹ 13,996
31 13392 25888 12496 ₹ 28,071 ₹ 28,866 ₹ 29,671
32 13392 25888 12496 ₹ 43,812 ₹ 45,498 ₹ 47,226
33 13392 25888 12496 ₹ 60,813 ₹ 63,793 ₹ 66,889
34 13392 25888 12496 ₹ 79,174 ₹ 83,918 ₹ 88,911
35 13392 25888 12496 ₹ 99,003 ₹ 1,06,056 ₹ 1,13,576
36 13392 25888 12496 ₹ 1,20,419 ₹ 1,30,407 ₹ 1,41,201
37 13392 25888 12496 ₹ 1,43,549 ₹ 1,57,193 ₹ 1,72,141
38 13392 25888 12496 ₹ 1,68,528 ₹ 1,86,658 ₹ 2,06,793
39 13392 25888 12496 ₹ 1,95,506 ₹ 2,19,069 ₹ 2,45,604
40 13392 25888 12496 ₹ 2,24,642 ₹ 2,54,722 ₹ 2,89,072
41 13392 25888 12496 ₹ 2,56,109 ₹ 2,93,940 ₹ 3,37,756
42 13392 25888 12496 ₹ 2,90,094 ₹ 3,37,079 ₹ 3,92,282
43 13392 25888 12496 ₹ 3,26,797 ₹ 3,84,533 ₹ 4,53,351
44 13392 25888 12496 ₹ 3,66,436 ₹ 4,36,732 ₹ 5,21,749
45 13392 25888 12496 ₹ 4,09,247 ₹ 4,94,151 ₹ 5,98,354
46 13392 25888 12496 ₹ 4,55,482 ₹ 5,57,311 ₹ 6,84,152
47 13392 25888 12496 ₹ 5,05,417 ₹ 6,26,788 ₹ 7,80,246
48 13392 25888 12496 ₹ 5,59,346 ₹ 7,03,212 ₹ 8,87,871
49 13392 25888 12496 ₹ 6,17,589 ₹ 7,87,279 ₹ 10,08,411
50 13392 25888 12496 ₹ 6,80,492 ₹ 8,79,753 ₹ 11,43,416
51 13392 25888 12496 ₹ 7,48,427 ₹ 9,81,474 ₹ 12,94,622
52 13392 25888 12496 ₹ 8,21,796 ₹ 10,93,367 ₹ 14,63,972
53 13392 25888 12496 ₹ 9,01,036 ₹ 12,16,449 ₹ 16,53,644
54 13392 25888 12496 ₹ 9,86,614 ₹ 13,51,839 ₹ 18,66,077
55 13392 25888 12496 ₹ 10,79,039 ₹ 15,00,769 ₹ 21,04,002
56 13392 25888 12496 ₹ 11,78,858 ₹ 16,64,591 ₹ 23,70,477
57 13392 25888 12496 ₹ 12,86,662 ₹ 18,44,796 ₹ 26,68,930
58 13392 25888 12496 ₹ 14,03,091 ₹ 20,43,021 ₹ 30,03,197
59 13392 25888 12496 ₹ 15,28,834 ₹ 22,61,069 ₹ 33,77,576
60 25888 25888 ₹ 16,79,100 ₹ 25,15,653 ₹ 38,11,880
61 25888 25888 ₹ 18,41,387 ₹ 27,95,695 ₹ 42,98,300
62 25888 25888 ₹ 20,16,657 ₹ 31,03,741 ₹ 48,43,091
63 25888 25888 ₹ 22,05,948 ₹ 34,42,592 ₹ 54,53,256
64 25888 25888 ₹ 24,10,383 ₹ 38,15,328 ₹ 61,36,642
65 25888 25888 ₹ 26,31,173 ₹ 42,25,338 ₹ 69,02,033
66 25888 25888 ₹ 28,69,626 ₹ 46,76,348 ₹ 77,59,272
67 25888 25888 ₹ 31,27,155 ₹ 51,72,460 ₹ 87,19,379
68 25888 25888 ₹ 34,05,286 ₹ 57,18,183 ₹ 97,94,699
69 25888 25888 ₹ 37,05,668 ₹ 63,18,478 ₹ 1,09,99,057
70 25888 25888 ₹ 40,30,081 ₹ 69,78,802 ₹ 1,23,47,939
71 25888 25888 ₹ 43,80,446 ₹ 77,05,159 ₹ 1,38,58,686
72 25888 25888 ₹ 47,58,841 ₹ 85,04,152 ₹ 1,55,50,723
73 25888 25888 ₹ 51,67,507 ₹ 93,83,044 ₹ 1,74,45,804
74 25888 25888 ₹ 56,08,867 ₹ 1,03,49,825 ₹ 1,95,68,296
75 25888 25888 ₹ 60,85,535 ₹ 1,14,13,284 ₹ 2,19,45,486
76 25888 25888 ₹ 66,00,337 ₹ 1,25,83,090 ₹ 2,46,07,938
77 25888 25888 ₹ 71,56,323 ₹ 1,38,69,875 ₹ 2,75,89,886
78 25888 25888 ₹ 77,56,788 ₹ 1,52,85,340 ₹ 3,09,29,666
79 25888 25888 ₹ 84,05,290 ₹ 1,68,42,351 ₹ 3,46,70,221
80 25888 25888 ₹ 91,05,672 ₹ 1,85,55,062 ₹ 3,88,59,642
81 25888 25888 ₹ 98,62,085 ₹ 2,04,39,045 ₹ 4,35,51,794
82 25888 25888 ₹ 1,06,79,011 ₹ 2,25,11,427 ₹ 4,88,07,003
83 25888 25888 ₹ 1,15,61,291 ₹ 2,47,91,046 ₹ 5,46,92,838
84 25888 25888 ₹ 1,25,14,153 ₹ 2,72,98,628 ₹ 6,12,84,973
85 25888 25888 ₹ 1,35,43,245 ₹ 3,00,56,967 ₹ 6,86,68,165

Special Cases

There are some special circumstances where you can opt for term insurance cover till the age of 85 years –

  1. If you have children with special needs and you are not able to accumulate the required  corpus for child`s lifetime needs.
  2. If you are a grandparent have dependent grandchildren
  3. If you are planning to work beyond the age of 60
  4. If you are not able to clear your liabilities till the age of 60

Conclusion

Do not buy Term Insurance plan till age 85/99/100 years on the grounds that it’ll serve as a legacy for your children, and you will save any premium. We’ve already evaluated and broken down this calculation and seen that that this amount of 1 Crore will become negligible in a span of 40/50 years. Besides, this money can be used only by your nominee alone and you’d never be able to use this money. On the other hand, if you invest the additional amount in mutual funds and survive beyond 60, the money would be in your hands.

Points to remember:

  1. Purchase term insurance till the age of 60
  2. If you are planning to work after the age of 60 or if you have any special circumstance, then you can purchase term insurance till the age of 70/80/90 etc.