‘Zero cost’ extended term cover: Insurers offer life covers till you hang your boots

MUMBAI: Working life has been increasingly extending beyond 60 for a large chunk of the population. As a result, life insurers are designing policies that continue to function well beyond 60 and up to 70 and even 75 years of age. Since many buyers are unsure of the need for cover after they turn 60, companies are designing a ‘zero cost’ extended term cover where the premium paid is returned to the policyholder (without interest) if they cancel the policy early.

One reason for extended term cover is increasing life expectancy. But given that many buyers are not sure of the need for insurance after 60, companies are giving them the option to discontinue the contract if the policyholders feel their family is no longer financially dependent on them. “Many policyholders are unsure when they will retire and would like to have a term cover until the age of 75. But there is a possibility that they may choose to retire at 60, or they may not need insurance after their family is well settled and their financial needs are taken care of. This policy provides them with the flexibility of cancelling it early and receiving the higher premium they have paid for a longer term,” said Policybazaar business head (term life insurance) Sajja Praveen Chowdary.

Bajaj Allianz Life and Max Life are among those that have launched such policies and other life companies are working on them. Many countries have increased their retirement age with increasing life expectancy. However, it is tough for senior citizens to buy life cover, and there is also uncertainty over the need for such a cover.

“When people reach a certain age, they have usually accumulated assets and wealth and may not feel the need for having insurance. We have sought to address this need by allowing them to cancel the policy at a pre-determined interval and get their money back,” said Bajaj Allianz Life Insurance appointed actuary Avdhesh Gupta. While customers can cancel all policies, it is for the first time that insurers are returning the higher premium collected. Because insurers charge a ‘level’ premium across the policy’s maturity, the annual premium on a policy that matures at 70 would be higher than a premium that matures at 60.