Understanding Insurance Plans – Why Timing Matters More Than Tenure.

Since the decades, Term insurance was considered to be the yardstick of financial security offering complete protection without the frills of savings or investment; Unlike traditional life insurance plans, which blend coverage with wealth-building, since the preterm of a term insurance is avidly simple: if the policyholder passes away during the policy term, their family receives a lump sum payout. No bonuses, no returns — just uncompromised protection.

But as financial awareness grows, a nuanced question becomes deplorable – When is term insurance truly necessary, and how long should one stay covered?

The Role of Term Insurance –

It is solicited as an alternative of Income Replacement, Not providing any Lifelong Cover. The Financial planners are mostly aligned on one basic fundamentals — term insurance is not meant to be forever. Its primary purpose is income replacement during a person’s active earning years. If a family depends on your income, term insurance ensures they’re not left financially vulnerable in your absence. It helps cover everything from home loans and EMIs to education costs and daily living expenses.

For most individuals, this need peaks between the age of 25 and 60–70, when liabilities are high and income generation is at its prime. During this period, term insurance acts as a financial safety, one that can help maintain a family’s lifestyle, goals, and peace of mind. However, when Protection Becomes Less Critical, once someone approach retirement typically beyond age 60 or 70 the need for term insurance often diminishes. The reasons are commonly attributed as:

• Home loans and other debts are likely repaid

• Children may be financially independent

• A retirement corpus may already be in place

• Daily expenses are better planned and stabilised.

Retirement Planning – 

When the need for Term Insurance loses its merits; In such scenarios, it makes more sense to shift focus to retirement income, healthcare, and wealth preservation than to continue paying high premiums for term coverage that may no longer be essential.

Although, ‘One Size Doesn’t Fit All’ but still, there’s no one-size-fits-all solution. A self-employed professional may continue earning well past 60. Some may have late life responsibilities like dependent parents or young children born later in life. For them, extending coverage beyond the traditional retirement age could be justified. The key is personalisation: aligning the duration of the policy with one’s own financial dependents and liabilities, not with a general rule. A Shift Toward Smarter Financial Planning is what the insurance industry envisage.

Mr. Sujeet Kothare, Executive Vice President – Products, Business Mid Office and Digital Marketing, Tata AIA Life Insurance, shared an interesting insight: “At Tata AIA, we are noticing a shift in how consumers are beginning to engage with term insurance. More and more individuals are now aligning their term insurance tenure with their income-earning years, recognising that the real purpose of term insurance is income replacement, and not lifelong protection or legacy planning. In the recent months, we have seen an incremental 10% new customers opting for term plans with coverage below the age of 70. This signals a strong move toward smarter, more life stage appropriate planning”. He further added by quoting, “As insurers, it’s our responsibility to guide this shift not just by selling products, but by helping customers understand when insurance is most relevant, and when it’s time to pivot to income and health-focused solutions to ensure a well-planned retirement”.

Team Maverick