For those of you who are members of the facebook group Asan Ideas for wealth, you would have seen that lots of people recommend to take term insurance only till the working age of 55 or 60. Let us do some calculations to understand why this is recommended.
Let us take the case of a 30 year old male non-smoker in good health. I have checked the premium for a 30 year policy and 55 year policy with sum assured 1 Crore. The premium data is from HDFC click2protect 3D, without any riders.
Annual premium for 30 year policy: Rs. 10,134
Annual premium for 55 year policy: Rs. 18,495
Now, let us find out over the period of 55 years, what will be the value of the difference between the premium if invested at 8%, 10% and 12% per annum return. Below is the table which shows this calculation:
As seen above, the difference in premium if invested well can give good returns and even exceed the insured value of 1 Crore over the period of 55 years.
Why would a retired person not earning any salary need a life insurance in any case? The purpose of life insurance is to cover the risk of loss of income for the dependent of the insured. There is no risk to cover post retirement as there is no income!
It makes better sense to take a term life insurance only till age 55 or 60 until retirement. Avoid taking a term insurance policy till age 85 just because it is available!