How Much Income is Needed to Get a Term Insurance in India?

After the COVID outbreak, people have become more conscious about purchasing life insurance. Therefore many want to know the various eligibility criteria for owning a term plan. Finding an answer to whether one’s employment status affects their term insurance approval is important as people these days are often engaged in full-time freelance activities. 

How does income eligibility for term insurance apply to them? 

To know this and realise the importance of income proof in the term plan authorisation process, please continue reading.

Every time you renew a term plan or even the first time when you approach an insurer, the company asks you to provide valid income proof. If you prefer not to disclose this information, the application process will not proceed to the consequent steps. 

Have you ever wondered what makes income proof that vital piece of information for an insurer? Well, these are the reasons:

• A term plan is supposed to be a replacement for the insured individual’s income if they meet an unfortunate demise within the policy term. Hence, the insurer needs to estimate an approximate value that the concerned individual may earn annually before approving the coverage sum. 
• Also, insurance companies need income proof to assess one's premium paying capacity. When they feel confident about your earning potential, chances are high that they will approve substantial coverage. 
• Besides the above two reasons, insurance companies also want to know about one’s employment history and analyse their career prospects. This is done to understand whether you fall under the category of high-risk professions. Also, the coverage amount can vary drastically based on the job leaving tendency and seniority at your current workplace. You can also see insurance companies prefer salaried individuals over self-employed people as they can provide well-defined income proof. 
• Finally, income proof is necessary to avoid instances of over-insurance. In these cases, the policy buyer gets entitled to more coverage compared to the real cash value. If such situations arise, it may nullify the pact leading to the denial of death benefits even after the premiums have been paid on time.

In India, there is no minimum income-related rule barring people from applying for a term plan. However, if you are a salaried professional, then the insurer will definitely ask for past salary slips.

Also, for self-employed individuals, the insurance companies review their bank account details and income tax returns to fix a term cover. Lastly, individual insurers may stipulate a minimum monthly income to ensure their clientele can furnish the premiums on time. To find relevant information regarding this, you must refer to their official website or contact customer care over a phone call.

These are a few requirements that you should meet to become eligible for a term insurance plan:

• You need to be at least 18 years of age. Moreover, many insurance companies set an upper age limit of 65 years. Most importantly, the payable premium depends on the age when you will be applying for a term plan.
• Any term insurance applicant who is requesting a new policy has to be an Indian or residing in the country during the approval stage. The agreement continues to hold the same effect even if you leave India for work or study purposes after purchasing the plan.
• You need to undergo a full body health checkup before applying for a life insurance policy. This step cannot be skipped as the insurer needs to evaluate your present health status before confirming assured death benefits.
• In addition to everything else, your preferred insurer considers your job profile too. For instance, if you belong to a profession that comes with high-risk involvement, the premiums are revised accordingly.

To procure a term insurance policy from one of the reputed insurers you must produce the following documents:

• ID Proof (Aadhaar Card, PAN Card, Passport, and Voter ID Card): These details are necessary for the insurance company to cross-check your entered information. Also, in return, they promise to protect you against fraud and identity theft if you cooperate with them throughout the process.
• Permanent Address Proof (Electricity Bill, Ration Card, and Mobile Bill): Similar to ID proof documents, these papers also help you to protect yourself from fraud, especially at the time of processing a claim.
• Income Proof: Past three months' worth of financial documents are accepted as proof of income. These include income tax returns (ITR) for the three most recent assessment years and bank statement from the previous six months indicating your salary.
• Age Proof (Birth Certificate, School/College Leaving Certificate, and Marriage Certificate): As the premiums depend on the age when you are applying, the insurance companies ask for this document. 

Apart from these documents, you will need to produce your current passport-size photographs and most recent medical reports to the company to get the term insurance approved. 

Here, we have more or less covered the answers that are likely to subdue your concerns regarding minimum income eligibility for term insurance. Also, many people doubt whether they are eligible to get a term plan as per their educational background. We would like to clarify that no insurance provider evaluates your educational history before approving your term plan request. You just need to meet the aforesaid criteria and produce the necessary papers to ensure your request is validated.