Term insurance has long been
considered the bedrock of financial security—offering pure protection without
the frills of savings or investment. Unlike traditional life insurance plans, which
blend coverage with wealth-building, term insurance is refreshingly simple: if
the policyholder passes away during the policy term, their family receives a
lump sum payout. That’s it. No bonuses, no returns—just uncompromised
protection.
But as financial awareness grows,
a more nuanced question is emerging: When is term insurance truly necessary,
and how long should one stay covered?
The Role of Term Insurance:
Income Replacement, Not Lifelong Cover
Financial planners are aligned on
one thing—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 window, term insurance acts as a
financial safety net—one that can help maintain a family’s lifestyle, goals,
and peace of mind.
When Protection Becomes Less
Critical
However, once you approach
retirement—typically beyond age 60 or 70—the need for term insurance often
diminishes. Why?
- 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 stabilized
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.
One Size Doesn’t Fit All
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 personalization:
aligning the duration of the policy with your financial dependents and
liabilities, not with a general rule.
A Shift Toward Smarter
Financial Planning
The insurance industry is starting
to reflect this change in thinking.
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, recognizing that the real purpose of term insurance is
income replacement—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 adds,
“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.”
The Bottom Line
Term insurance isn’t about
covering your entire life. And like any financial tool, its value lies in how
thoughtfully it’s used.
