High sum assured may not give enough cover

The policy, as the name suggests, provides term insurance to senior citizens.The minimum and the maximum entry age are 50 and 85, respectively. Though the product offers a whole life cover, it does not ask buyers to undergo medical tests. The premium paying term, though, will end at age 90.

The company offers a maximum sum assured of Rs 5 lakh. The minimum sum assured is as low as Rs 2,338. Both these apply only two years after the policy has been bought. If the policyholder dies before two years, the dependents will be paid 125 per cent of the total premium paid till date.

But despite the bonus of 25 per cent over the premium paid, the product is expensive, as compared to other term plans available. The annual premium for a 50-year male seeking maximum cover under IDBI’s Termsurance Seniors Insurance Plan is Rs 18,195. If the same cover is bought at the age of 85, it will cost Rs 213,890. The same person can buy a 10-15 year simple term from other insurers at Rs 6,000 annually.

However, there are differences in the features offered by the senior’s insurance plan that make it difficult to compare the product with other term insurance in the market. The maximum entry age for most term insurers is 65 years and they do not extend cover beyond age 75. Also, no term insurer gives a whole life cover.

Those available today are offered by traditional and unit-linked insurance plans. While the waiver of medical tests is allowed by insurers, especially for the smaller sum assured of Rs 5-10 lakh, buyers in the 60-plus age bracket have to go through with it.

The company has positioned the product for people nearing retirement and with inadequate insurance to support kin after their demise. Experts feel senior citizens opting for the policy would require an income stream even after retirement.

If the buyer opts for the minimum sum assured at the minimum entry age of 50, where he needs to pay premiums as low as Rs 1,000 annually, the amount still might not suffice. This may limit the number of takers for the product, unless it is targeted at those in the lower income bracket.