It is easy to feel a little past your prime by the age of 50, especially in today’s youth-centric world. However, turning 50 is a watershed moment in one’s life. This age will not only provide you with chances, but also present you with obstacles. The good news is that you will most likely make more money in your 50s than you did early in your career, affording you financial freedom. At the same time, you may be faced with additional large expenses, such as your children’s higher education or marriage, or even the prospect of purchasing a new house.
In such a situation, if, for instance, your existing life insurance policy term gets over, or you haven’t even purchased a policy yet, then should you renew or buy a term life insurance when you turn 50? Let us take a look at the pros and cons.
Pros: One advantage of buying a term insurance policy at 50 is that it can provide financial support to your children or family members who are financially dependent on you in case something unfortunate happens to you. Your spouse can avail death benefits of this policy in case you die, which could make her self-reliant and financially equipped. It might also help compensate for legal costs or property taxes that you might have incurred. Rakesh Goyal, director, Probus Insurance, said having a term insurance policy can help your family members or dependents (post your demise) repay the hefty loans you owe. “The term policy can offer benefits during retirement years as it can be a good alternative for a regular income for the family during these years. The policy also comes with several tax benefits,” said Goyal.
Cons: A disadvantage of buying a term insurance policy at 50 could be the age factor. It can be challenging to find the right plan to suit your requirements at this age, and the policy premium rates would always be higher compared with plans bought earlier. Also, a retiree with insufficient savings can find it difficult to pay these high premium rates. Health factors could be another issue.
Naval Goel, founder and chief executive officer, PolicyX.com, said there are higher chances of such persons contracting diseases, which can affect the premium on account of loading charges. “Another disadvantage for those purchasing term insurance at the age of 50 is the lower sum assured. While a person of 30 years of age can get a sum assured 10-20 times their current income, a person at 50 years of age will get only 5-10 times of the income sum insured,” Goel added.
Now, let us examine the life situations that are likely to trigger the purchase of term life insurance even if you are in your 50s.
Outstanding debts: Sajja Praveen Chowdary, head – term life insurance, Policybazaar.com, said there are people who have not saved enough or who are in debt. “It is possible that you may die before paying off your mortgage. This is when term insurance comes in handy. To cover the specific loan amount, a term insurance policy can be purchased. If the individual is no longer alive, the sum assured can be used to pay off loans while causing no inconvenience to family members,” said Chowdary.
Financially dependent children: Life insurance decisions can also depend on your responsibilities, and not just age. “People no longer marry at 23 and have children between 25 and 28 years of age. Nowadays, one of the most common demographic shifts is that more and more people postpone marriage, and starting a family. As a result, by the time one is 50, one’s children are most likely still in school and may require your financial assistance; thus, purchasing term insurance at the age of 50, even at a higher premium, can be a wise decision,” said Chowdary.
Deciding factors: “The premium rates of the term insurance policies would be on the higher side for people who purchase a policy at or above the age of 50. But there is no right age to buy a term insurance. Sooner the better, of course, but better late than never,” said Nayan Goswami, head of sales and service, SANA.Insure.
Adding to it, Col. Sanjeev Govila (retd), chief executive officer, Hum Fauji Initiatives, said, “Buying a term insurance is never to be linked to age but to the future liabilities—their quantum and duration.”
The liabilities could pertain to anything from children’s requirements (education, higher education, marriage, even medical requirements etc.) to own house, retirement living, travel, medical necessities and even lifestyle requirements such as family vacations in case the primary breadwinner dies
Besides, how much and for how long to take the term insurance will depend on carefully calculating the assets and liabilities at various points of time in life for the whole family, with inflation and taxation also factored in practically.
Govila further said that the basic tenet of this calculation is that the family’s standard of living, including critical and lifestyle goals, should not suffer if a person dies.
Of course, it should be remembered that life insurance is neither a wealth creation tool nor a succession planning tool for the family. It is a sustenance tool for the interim so that the family can get back on its own after the family head’s death.
