IDBI Federal Life's Term Plan for senior citizens

The fundamental objective of life insurance is to replace the policyholder's income and provide financially for dependents in the event of his/her death. Therefore, life insurance is recommended for individuals with income and dependents. Typically, policies have tenure of up to 35 years; if the insured buys the policy at the age of 25, it will offer a cover till he/she retires, post which there would be no income to be replaced.

Now, IDBI Federal Life Insurance has launched a term plan, the Seniors Insurance Plan, catering only to those aged over 50. The maximum age at entry set by the insurer is 85. The company promises to extend the cover without making the proposer go through any medical tests.

Policy term: The maximum tenure under the plan can extend up to the policyholder's death; the premium paying term is till the insured turns 90. The policy can be surrendered after three policy years.

Sum assured : The maximum cover offered under the policy is Rs 5 lakh. It kicks in after two years from the date of commencement. In case of the insured's demise within two years of buying the policy, 125% of the total premium paid will be disbursed to the dependents.

Premium: For a 50-year-old male seeking a cover of Rs 5 lakh, the annual premium would be just over Rs 20,000. If you buy the plan at 85, the premium amount will go up to Rs 2, 13,890 for the same sum assured.

Suitability: The insurer is promoting the product as one that will take care of the insured's spouse upon his death. Some financial planners point out that most individuals fulfill their financial responsibilities before retirement (by the time they turn 60) and, hence, there is no income to be replaced by the cover post this period. Even if the retirement age were to be stretched to 70, they can look at a term policy with a 10-to 15-year tenure. A 50-year-old insurance seeker can obtain a Rs 10-lakh cover with a 15-year tenure under a simple term plan at a cost (premium) of about Rs 6,000.

Why go for it: Earning individuals who have never purchased life insurance but have dependents can look at this policy.

Why you should not: Instead of policies with whole-of-life terms, one can look at regular term policies with a 10- to 15-year tenure as they would charge lower premiums.