Can I Purchase Term Insurance without Income Proof?

Life is a rollercoaster of experiences, filled with its share of surprises. So, it's crucial to take proactive steps and prepare for whatever the journey may bring. Well, term insurance is that preparation. It is your way of laying a sturdy foundation, ensuring that your loved ones are ready to weather any storm. It serves as a protective shield around your people who are dependent on you financially, ensuring their well-being, especially if you haven't had the opportunity to build significant wealth.

When you're buying term insurance, you'll be requested to submit a range of documents for verification. These documents are necessary to determine your eligibility and the specific terms of your insurance policy. And, of all the documents needed, proof of income holds particular significance.

But what if you don’t have income proof? Can You purchase term insurance without income proof? Let’s find out.

What Is Term Insurance?

Term insurance is a straightforward life insurance product that offers coverage for a specified duration in return for a regular fee called a premium. In the unfortunate event of your passing during the policy period, the insurance company will provide a payout, technically called the 'sum assured', to your chosen nominee.

This money can be a lifeline, allowing your loved ones to maintain their current lifestyle and pursue their dreams despite life's unpredictable twists and turns. Remember, your family will receive the money as per the claim payout option chosen by you at the time of policy purchase.

Term insurance is essentially a pure risk cover. If you outlive the policy term, no benefits are paid to you.

For example, Mahesh, 40 years old, buys a term insurance plan with a sum assured of Rs 30 lakhs. He opts for a policy duration of 15 years and appoints his brother, Rakesh, as his nominee.

➔ If Mahesh passes away in the middle of the policy term, Rakesh will receive a sum of Rs 30 lakhs.

➔ If Mahesh survives the policy period, he won’t receive anything back.

Why Do You Need To Submit Income Proof When Buying Term Insurance?

Term insurance places a strong emphasis on requiring income verification to –

1. Check Whether You Are Eligible

The main aim behind term insurance is to make sure that it protects your family if something unexpected were to happen to you. So, it's important to show that you're an earning member of your family and that they depend on you for their financial needs. Without proof of your income, it can be more difficult for the insurance company to determine if you qualify for term insurance.

2. Prevent Any Moral Hazards

A moral hazard happens when someone buys insurance with the intention of making a much larger claim than they genuinely need. Let’s say someone with a monthly income of less than Rs. 5,000 tries to purchase a term insurance plan with a cover of Rs 1 crore. Basically, this person is setting an unrealistic and costly goal. To avoid these kinds of situations, insurance companies review your income-proof documents and assess your actual insurance needs.

3. Estimate The Maximum Sum Assured You Are Eligible For

Your income plays a significant role in determining your eligibility for term insurance and how much coverage you can get. Insurance companies figure out the maximum amount you can be insured for by looking at your income and your age when you get the policy. This is done by multiplying your current income by certain factors, depending on your present age, like 15X, 20X, etc. Please note that this factor will vary across insurers.

Example: Bhavna, 27, has an annual income of Rs 15 lakhs. She wants to buy term insurance from insurer ‘X’. As per the insurer's guidelines, individuals in the age group of 20-30 years are eligible to purchase coverage equal to 25 times their annual income.

Factor specified by the insurer = 25X Bhavna’s annual income = Rs 15 lakhs

This means that the highest coverage Bhavna can qualify for is Rs 3.75 crores (25 * 15,00,000).

Please note that if you already hold a life insurance plan, the sum assured of it will be subtracted from the term insurance cover you can obtain.

Let’s say Bhavna already has a life insurance plan with a sum assured of 50 Lakhs.

In that case, the highest term insurance cover she can choose would be Rs 3.25 Crores (Rs 3.75 crore – 50 lakhs)

This shows how factors like your age, income, and existing policies influence your term insurance coverage.

Can You Get Term Insurance Without Income Proof?

In India, to get mainstream term insurance plans, you typically need to provide income proof. In recent times, some insurance companies have started to accept surrogate documents for income verification, especially for self-employed individuals who may not have traditional income documents.

In case you want to purchase term insurance without income proof, there's a solution - the Insurance Regulatory and Development Authority of India (IRDAI) has introduced a standardised term insurance product called Saral Jeevan Bima.

Saral Jeevan Bima is a unique insurance plan because it follows a standard format in terms of its terms, conditions, customisation options, etc., across insurers. The best part is it doesn't have the usual restrictions related to aspects like your education, income, location, occupation, etc.

This plan is a lifeline for those who want to provide their families with term insurance but don't meet the eligibility criteria for a regular term plan. Just like a regular term insurance policy, Saral Jeevan Bima ensures that if something unfortunate were to happen to you during the policy's term, a fixed sum of money will be paid to your family.

However, there are two cases in which a Saral Jeevan Bima policy won't provide a claim payout:

● Death because of suicide in the first policy year.
● Death because of sickness within the first 45 days (this is an additional exclusion in Saral Jeevan Bima policy).

Looking To Secure Your Family? Here Are ABSLI Term Insurance Plans!

1. ABSLI Anmol Suraksha Kawach[UIN: 109N139V01] ABSLI Anmol Suraksha Kawach [UIN: 109N139V01] is a straightforward and cost-effective term insurance plan designed to offer financial protection for a short duration. In a world where life can be unpredictable, it's crucial to prioritise the financial security of your family, especially if you are the primary breadwinner. This plan offers life insurance coverage and protection benefits to safeguard your loved ones from potential financial hardships in the event of unforeseen circumstances, even in your absence. Key features of this plan include coverage for up to 5 years, flexible payment options (single pay/regular pay), budget-friendly premiums, etc.

2. ABSLI Poorna Suraksha Kawach [UIN: 109N138V02] ABSLI Poorna Suraksha Kawach [UIN: 109N138V02] is a comprehensive protection solution tailored to meet your financial needs and secure your family's future in the face of life's uncertainties. It provides a range of plan options to align with your preferences. Notable features of ABSLI Poorna Suraksha Kawach include multiple plan options, an inbuilt terminal illness benefit, an option to access a 'One-time exit value' for emergencies, etc.

3. ABSLI DigiShield Plan [UIN:109N108V10] Whether you're a parent, newly married, a young individual, or dealing with a home loan, ABSLI DigiShield Plan term insurance provides financial security for your loved ones in the face of life's uncertainties. This plan comes with versatile features, including limited pay (to speed up premium payments), sum assured reduction option (decreasing cover), whole life option covering up to 100 years of age, return of premium option where you’ll get all the premiums (without taxes) back if you survive the policy term, and riders such as critical illness rider, accidental death benefit rider, etc.

Wrapping up!

A regular term insurance policy often involves a lot of paperwork to determine your eligibility criteria, especially your income proof. However, if you find yourself ineligible for a regular term insurance plan due to factors like education, occupation, or income limitations, the Saral Jeevan Bima Policy offers a lifeline. This policy is a unique solution, as it doesn't place the usual restrictions on eligibility, making it accessible to a broader range of individuals.