Term Plan Eligibility: Criteria for Buying Term Insurance

Table of Content

1. What is Term Insurance?

2. Term Insurance Eligibility Criteria

3. Documents Required for Term Plan Eligibility

4. Who should buy a term insurance plan?

5. Benefits of Buying a Term Insurance Plan

6. FAQ’s on Term Plan Eligibility

Insurance companies consider several factors before approving a term insurance plan. Common eligibility factors include age, income, occupation, medical history, etc. They may also involve lifestyle habits such as smoking or alcohol consumption.

An insurer may also review existing financial liabilities and require applicants to submit identity, address, income, and medical documents when applying.

Since eligibility requirements can vary across insurers and policy types, reviewing them beforehand helps ensure a smoother and more informed purchase decision.

What is Term Insurance?

Term insurance is a protection plan that provides the family with a lump sum payout if the policyholder dies untimely within the policy term. This money can support them to fight this sudden turmoil, help them in paying for their regular expenses as well as liabilities, maintain the preferred living standard and fulfil their life goals.

Term Insurance Eligibility Criteria

Anyone who is of legal age and has dependants can buy term insurance in India. If your loved ones depend on you financially, the term insurance payouts will help them. However, even if you don’t have dependants now, but could likely have some in the future (for example, if you marry and have children), it still makes sense to buy term insurance beforehand. It's essential to assess how much term insurance do I need to ensure your coverage is adequate. It’s better to understand the eligibility criteria clearly.

• Term Insurance for NRIs:

If you are a Non-Resident Indian (NRI), you can also get a term insurance policy in India. The eligibility criteria for NRIs are quite similar to those for residents, with the additional necessity of submitting acceptable proof of residential status. The coverage and benefits remain the same, and NRIs can select from a variety of amount assured alternatives, including high coverage plans such as one crore. This makes term insurance an excellent choice for NRIs looking to financially secure their families back in India.

• Age: 

  One can buy a best term insurance plan in India if they fall within the age limit for term insurance, typically ranging between 18–65 years.

  However, it is possible to buy a term plan at 65 years of age and opt for life cover up to the age of 99.The age of the policyholder is a crucial factor in premium calculation.

• Citizenship:

  Anyone residing in India can buy term insurance. The term insurance eligibility remains the same if he shifts abroad for academics or work purposes after the purchase.

• Medical tests:

  To purchase term insurance, one needs to undergo medical tests. It’s important to furnish the medical history and records correctly, which plays a significant role in deciding the premium amount. Medical tests for term insurance during the purchase help both the insurer and the insured as it determines the substance and value of the policy plan. However, it is not a mandatory requirement. There are term insurance policies that do not require any medical tests, but these could often offer a lower sum assured.

• Lifestyle habits:

  Lifestyle behaviors including smoking, level of stress and sleeping patterns are determinants of term insurance premiums. Premium will be higher if you are a smoker or live a stressful life. Some of these stressful life factors include adventurous / hazardous sports which pose a risk to life or those who work in a hazardous environment and are subject to high stress levels. Similarly, term insurance, for diabetes and other lifestyle-related conditions may result in higher premiums due to associated health risks

Documents Required for Term Plan Eligibility

Now that you have seen that the term insurance eligibility depends on factors like age and income, and may require documents for address, identity, etc., you must keep them handy. Here are some lists of documents that your insurer may ask for:

• Identity and Address Verification: Insurers require identity verification documents to ensure that they are issuing a policy to the right applicant. For this, provide KYC your Aadhaar Card, Voter ID card or PAN Card.  

• Financial Documents: Insurers may consider stable income a sign of a policyholder's financial capability to pay premiums. For this, provide copies of your latest income proof (e.g., salary slips for the last 3 months, a copy of your latest ITR, or Form 16).

Who should buy a term insurance plan?

Anyone can buy a term insurance policy, according to the product's terms and conditions. For instance, at the age of 65, you can purchase a term plan with life insurance coverage until the age of 99. There is no set income restriction for the same. However, it’s important to know who should purchase a term plan and what can be benefitted maximum. While the list below is not exhaustive, it is indicative of persons who can benefit from a sound term insurance plan.

• Individuals with dependents:

  If you have a spouse, children and/or dependant parents, buying term plans can be a wise idea. In case the unforeseen happens, your family will receive the sum assured which they can utilise in paying for all the expenses, cost of living, and liabilities and to realise their life goals.

• Sole earner of the family:

  If you’re the primary or sole bread-earner of the family, it can be really difficult for them to cope with the financial struggles if you are not there anymore. Here the death benefit of term insurance can help them stay afloat.

• Individuals with outstanding liabilities:

  If you have a mortgage, an outstanding loan, debts or any other financial liability, they can be a burden for your family if you die suddenly. The term insurance can be a saviour here with its death benefit paying for all the financial obligations.

• Young adults:

  Those who have recently begun their careers can easily get term insurance. This will be an excellent investment opportunity to secure their family at a reasonable cost. Young customers pay substantially cheaper premiums since they are at a lesser risk of death.

• Self-employed:

  Since the self-employed have an uncertain income profile, it’s always beneficial for them to buy term insurance for the self-employed to keep the beneficiaries financially protected in the future. This will not only protect their family in case of an unfortunate event but save their business too.

• Those looking for a smooth life:

  Term insurance is a basic and easy protection plan at a reasonable price. Thus, it is a preferred choice for those eyeing a simple and affordable life.

Benefits of Buying a Term Insurance Plan

Aside from understanding term plan eligibility, you must first understand why it matters to you. A term insurance plan offers a financial safety net to your family members, especially those who depend on you. As you pay the premiums, if something happens to you, your insurer pays a lump sum to your family for their daily livelihood in your absence.

If you are still wondering how a term insurance plan works, suppose a policyholder with a ₹1 crore term insurance plan passes away during the policy term. The nominee receives the insured amount, which can help cover household expenses, loan repayments, and future financial needs and more.

For flexibility, term insurance plans also provide coverage at affordable premiums, flexible policy durations, and possible tax benefits. Additionally, their simple structure makes it easy for policyholders to understand and manage a term insurance plan.

FAQ’s on Term Plan Eligibility

Q: When should I buy a term insurance plan?

You should ideally buy a term plan as early as possible, such as in your 20s. The later you buy term insurance in life, the higher your premium cost is likely to be. And the younger you are, the lower your premium is likely to be.

Q: What is the eligibility of term insurance?

The eligibility criteria for term insurance tend to vary from one insurer to another insurer, but usually include age, income, citizenship proof, medical examination, identity proofs, etc. If you fail to meet any criteria, such as your age does not fall into the usual bracket of 18-65 years, or you do not clear your medical tests, you may not be eligible for term insurance.

Q: What is the eligibility for 1 crore term insurance?

The general eligibility criteria are similar for insurers, including age bracket, citizenship, minimum income, medical tests, etc. But if you are aiming for a Rs 1 crore term insurance cover, you need to ideally have at least Rs 10 lakh annual income since term insurance covers amount to Rs 10-15 times your annual income. However, as the eligibility criteria differ across insurers, check and enquire with the insurer when planning to buy Rs 1 crore term insurance.

Q: What is the minimum income required for term insurance?

The minimum income required to buy term insurance would vary across different insurers. However, there may often not be any minimum income requirement for a term insurance plan, as you would be eligible for a cover amount of around 10-15 times of your annual income. So, if, for instance, your annual income is Rs 5 lakhs, you may avail Rs 50 lakhs term insurance cover.

Q: Who can not buy term insurance?

If you fail to meet the eligibility criterion of an insurance company, such as the age bracket, citizenship proof, medical examination clearance, identity proofs, etc, your term life insurance application will likely to be rejected. For instance, if you do not fall into the usual age bracket of 18-65 years, you may not be eligible for term insurance.

Q: Why is health status important as a term insurance eligibility criteria?

When buying a term insurance, one must tick off a checklist of requirements, and a medical test is one of them. It is a routine checkup that your insurer may ask for. It helps your insurer to understand your health, any underlying conditions, and the chances of developing health issues. Depending on these, they determine the coverage and the premium you must pay. 

Q: Do lifestyle habits matter in term insurance eligibility?

Lifestyle habits do not directly impact eligibility; a certain lifestyle habit does not make an individual ineligible. However,  risky lifestyle habits like smoking and drinking increase the chances of being prone to diseases. The liability of an insurer for such an individual increases. Thus, risky lifestyle habits may increase insurance premiums for an individual.

Q: What is a Term Insurance Eligibility Calculator?

A term insurance eligibility calculator is a digital tool on the internet. It helps you estimate the life insurance coverage you may qualify for and the expected premium amount that you may have to pay. Typically, on such a tool, you must enter your current age, gender, the amount of coverage you are looking for, the term for that coverage and calculate. 

Commonly Asked Questions

• Term Insurance Calculator – Check Your Eligibility
• What is the Age Limit to Buy a Term Insurance Policy?
• What are the Documents Required for Term Insurance?
• Can I buy a ₹1 Crore term plan if my annual income is less than ₹5 lakh?
• Do I need to undergo a medical check‑up even if I am young and have no diseases?
• Is a housewife or a non‑working spouse eligible for an independent term insurance policy?
• What happens to my eligibility if I start smoking after checking the criteria but before buying the policy?

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