Home / Money / Personal Finance /  Term insurance is not needed for people with no dependents

I’m a 40-year-old single woman. Should I buy term insurance? Is it necessary to have insurance other than the one provided by my employer, which is only a basic plan? I don’t have any dependents.

—Name withheld on request

The purpose of term insurance is to leave an estate for your dependents after death. Term insurance carries no survival benefits, so it’s not a must-buy product for someone with no dependents. If you already have a basic term insurance cover from your employer, you do not need to buy a separate individual plan.

Why do insurers ask for annual income when selecting a term insurance online? Is it relevant? If yes, why and how will it impact my insurance premium?

—Name withheld on request

One of the basic checks that insurers conduct is that the sum assured in a life insurance policy should be in line with a person’s income. A well-accepted standard is 10 times your annual income. This multiple can go even up to 20 times depending on the income and age. A sum assured that is lower than the above thresholds is fine with insurers. Insurers worry about very high sum assured to salary multiples because there is no strong financial planning justification for that. Also, insurers worry about adverse selection, where there is a possibility that people with ill health opt for insurance with a high sum assured. A person’s income has no impact on premium. It is driven by the choice of plan term, sum assured and health status.

I’m 45 and my wife is 46. We both work in an MNC. We want to buy health insurance to save tax. Can we split the premium to claim tax benefit under Section 80D?

—Name withheld on request

Both of you are separately eligible to claim a deduction of 25,000 under Section 80D. For that premium, you will be able to get a coverage of around 40-50 lakh each. You could choose to buy two plans individually and claim a deduction of payment made by the respective individual. Or, you could buy a family floater plan. This will help you save around 5% premium, however, the coverage amount will be shared between both of you. In the latter case, you could pay a premium from a joint bank account and split the deduction. It will be important to give a declaration that the total deduction claimed is not more than the premium payment.

Abhishek Bondia is principal officer and MD,

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