Updated May 2nd, 2024 at 22:59 IST

Living Golden on Better Terms: Why Term Insurance Must Be Part of Your Retirement Planning

With rising healthcare costs and increasing life expectancy, it's imperative to have a robust retirement plan in place.

Reported by: Digital Desk
Living Golden on Better Terms: Why Term Insurance Must Be Part of Your Retirement Planning | Image:Source

With rising healthcare costs and increasing life expectancy, it's imperative to have a robust retirement plan in place. While many individuals focus on traditional investment avenues, such as mutual funds and fixed deposits, term insurance is an overlooked aspect of retirement planning.

Term insurance, known for its affordability and financial security benefits, is now emerging as a valuable tool in retirement planning. With additional features like tax benefits and coverage against critical illnesses, it stands as a comprehensive solution to ensure financial stability during retirement. 


Why Term Insurance

Term insurance is a type of life insurance that provides coverage for a predetermined amount of time. If the insured perishes within a specified time frame, the insurance pays the named beneficiary. One of its most beneficial features is its ability to offer comprehensive life coverage at comparatively low rates.


In today’s market, products like the ICICI Pru iProtect Smart Term Life Insurance plan provide coverage against critical illnesses. They offer claim payouts on the first diagnosis of covered illnesses without the need for hospital bills. With flexible payout options and coverage until age 99, these plans offer peace of mind and financial protection for policyholders and their families.

Key Features:


Coverage against 34 critical illnesses with claim payouts on first diagnosis, no hospital bills required

Four flexible payout options to meet the unique needs of policyholders and their families


Coverage until age 99 for overall protection throughout life

Flexibility to increase the life cover at key life stages of marriage, child-birth etc.


Simplified purchase process with online availability of plan features and benefits

Option to choose desired life cover and policy term to suit individual requirements


Premiums paid are tax-free under section 80 C of the Income Tax Act. If you opt for the Critical Illness benefit, you can get additional tax benefits under section 80D. Last, the claim amount received by you or your nominee is tax-free under section 10(10D).

Term Insurance for Retirement Planning

Individuals can incorporate term insurance into their retirement planning to maximise its value beyond protection during the term. Here are a few methods to do this:

Supplementing Retirement Income: Including term insurance in retirement planning entails leveraging the death benefit as a source of additional retirement income. By effectively structuring the policy, retirees can allocate a portion of the death benefit to provide consistent income for surviving spouses or dependents, assuring financial stability in retirement. 


Long-term Care Benefits: Some term insurance policies feature riders that provide long-term care benefits if the insured person needs assistance with everyday activities or suffers from a chronic illness. These riders can reduce the financial burden, protecting retirement funds from depletion.

Opting for a whole life insurance: Although whole life insurance plans carry a higher price tag compared to standard term insurance plans, they offer coverage up to 99 years of age. Choosing a whole life insurance policy ensures that the dependants are financially covered well into the policyholder’s retirement age, and the policyholder can leave a legacy for loved ones.


Term Insurance with Return of Premium (ROP): One can also choose term insurance plans with the Return of Premium (ROP) option. These plans provide the advantages of traditional term insurance while offering a refund of all premiums paid if the policyholder survives the policy term. 

Things to Consider While Choosing a Term Insurance

Before embarking on the conversion of term insurance into a comprehensive retirement plan, individuals should carefully evaluate several factors:

Claim Settlement Ratio: The claim settlement ratio is an important indicator used for assessing an insurance company's efficiency and dependability in resolving claims. It indicates the proportion of claims dealt with effectively by the insurer compared to the total number of claims received during a given period. A higher claim settlement ratio indicates the insurer has complied with its obligations to policyholders in previous years. 


Policy Conversion Costs: Conversion to permanent life insurance may incur additional costs, such as conversion fees and higher premiums. Evaluate these costs against the potential long-term benefits and returns of the policy.

Solvency Ratio: This ratio is a critical economic indicator used to measure an insurer's liquidity and potential to meet its financial obligations, particularly regarding claim settlements. A higher solvency ratio suggests that the insurer has adequate funds and is prepared to meet its financial responsibilities, such as claim payments, even in the face of difficult economic conditions or unanticipated events. A low solvency ratio, on the other hand, may suggest possible liquidity concerns or excessive risk exposure.


Current Financial Situation: Evaluate your current financial situation, including income, spending, savings, and existing retirement funds, to decide whether permanent life insurance is an appropriate choice for your retirement strategy.

Risk Tolerance: When selecting a life insurance policy, consider your preferences and risk tolerance. While universal life insurance allows flexibility in premium payments and alternatives for death benefits, whole life insurance guarantees premiums and grows cash value.


Furthermore, individuals can simplify their purchasing process by utilising a term insurance plan premium calculator. This free smart tool helps in estimating the monthly premium based on some common inputs like date of birth, gender, annual income, occupation, tobacco consumption, etc., aiding in the selection of the most suitable policy and facilitating wise monthly expenditure planning. 

These calculators are available on the official websites of leading financial institutions like ICICI Prudential: Free of Cost.


For Even More Golden Years 

Integrating term insurance into your retirement plan can be a fruitful financial strategy that provides both protection and post-retirement income. By taking advantage of the features and riders offered by term insurance plans, individuals can lay a solid safety net to rest on during their easy-going years. 


If you’re thinking of your and your family’s safety for today and the many tomorrows to come, term insurance for retirement is certainly worth considering. 






Published April 17th, 2024 at 15:14 IST