By Mayur Shetty
For the first time in India, senior citizens up to 85 years will be able to buy term insurance without any medical checks. Companies are realizing that while it makes sense to catch them young, it is the seniors who have the investible funds.
IDBI Federal Life Insurance-the three-way joint venture between public sector IDBI Bank, Federal Bank and European insurers Aegis- has floated a whole-life policy which allows individuals as old as 85 to buy insurance cover. While whole-life policies are not new to the Indian market, most providers, including Life Insurance Corporation, restrict maximum age at entry at 60 years.
Typically, life insurance is bought with the objective of providing income protection to dependents and since most people retire in their sixties the target market for life insurers is the working population. "We have found that there is a large section among senior citizens who want to buy insurance because they would like to bequeath an inheritance for their relatives," said Rao. He said that another of the impediments was the medical checks which are required from all senior citizens. IDBI Federal's policy requires no checks. However, the policy does restrict maximum sum insured to Rs 5 lakh and limits the benefit to 125% of the sum insured if there is death in the first two years.
IDBI Federal is the second company to target late entrants. Earlier, Max New York Life introduced a fast-track policy which allows those who missed out on buying insurance earlier an opportunity to build up a retirement corpus within a short time.
According to Rao, the limits on death benefits in the first two years of the policy would take care of any adverse selection by people suffering from serious ailments. The cost of cover also increases along with age. While the person who buys insurance at 50 will end up paying only Rs 3,300 an 85-year-old will pay 10 times that much. "While the premium may be high you have to bear in mind the average life expectancy for those entering at the maximum age," said Rao.
According to the World Health Organization, life expectancy at birth for Indian males is 63 while for females is 66. Insurers, however, don't go by general life expectancy but at the longevity of the insured population, which tends to be better than the rate for the general population.
IDBI Federal plans to bring down the cost of the product by selling it directly to customers.
"Initially, we will offer the product to customers of IDBI Bank and Federal Bank. But in the near future we will start marketing this product to everybody," said Rao. In the west whole-life plans are popular way of estate planning because it enables the inheritors escape estate tax. However, in India this is not a driver since inheritances are tax-free.
Copyright © 2011 Bennett, Coleman & Co. Ltd.
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Credit: Reports and photographs are exclusive property of original owners. Seniors World Chronicle, a not-for-profit, serves to chronicle and widen the reach.
