Term insurance offers a safeguard in the form of life coverage for a set period in return for a premium. If the insured person passes away during the policy duration, the insurer disburses the death benefit to the nominated individual in accordance with the policy’s terms and conditions.
When you acquire a term insurance plan, much like other life insurance policies, you must furnish standard documents such as proof of residence, ID verification, and so forth. One crucial document you’ll need to supply is proof of income.
Let’s examine the list of documents you’ll need to furnish when purchasing a term insurance plan.
Documents Necessary for Obtaining a Term Insurance Plan:
- Verification of Identity: This could be your PAN card, Aadhaar Card, or driver’s license.
- Proof of Address: Examples include an Aadhaar card, passport, utility bills in your name and address, etc.
- Passport-sized photo
- Medical Records: These may be required if your insurer mandates medical tests or requests your medical history.
- Income Confirmation: Documents serving as proof of income encompass an employer’s certificate, Form 16, Income Tax Returns, etc. Some insurers may not demand financial evidence (income proof) for certain (limited) sums assured. In such cases, insurers might request alternative documents like Income Estimator reports (e.g., CIBIL) if the life assured works for Top 2000 companies (NSE/BSE Top 1500 + Fortune 500), ensuring earned income.
You might wonder why income proof is sought when purchasing a term insurance plan. Many individuals might inquire if they can acquire term insurance without providing income proof. The straightforward response is that it could be contingent on your insurer. Income proof helps the insurance company determine the sum insured and the associated risk in insuring the applicant.
Why It Might Not be Feasible to Purchase Term Insurance Without Income Proof:
A term insurance policy is a pact between the life insurance provider and the policyholder. The policyholder must pay premiums over the selected payment term to maintain this agreement.
Paying premiums is a financial obligation. Hence, it’s crucial for the insurer to ascertain that the policyholder possesses sufficient income sources to pay the premiums promptly.
Here are a few reasons why presenting income proof is vital for procuring an insurance policy.
- Income proof aids in determining the optimal coverage that can be extended to the customer for a high sum assured.
- Providing term insurance without validating income proof may not be advisable, as it could make it challenging for the insurer to ascertain if the policy terms are suitable for you, thereby mitigating the risk of excessive coverage.
- It provides the company with insights into the source of the customer’s income. Financial eligibility is essential in evaluating the policyholder’s capacity to pay premiums throughout the policy period.
The income of the person responsible for premium payments is a pivotal consideration for the insurance provider. Whether purchasing term insurance online or offline, ensure that you adhere to the documentation guidelines diligently and have all the necessary documents readily available for a seamless, trouble-free purchasing experience. When procuring a new term insurance plan, make sure to explore options that align with your needs. Compare quotes for various plans using the term insurance calculator.
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