Student Term Insurance: When does it make sense and who should consider it?
Term insurance is traditionally associated with working individuals who have financial dependants, but insurers are increasingly offering policies aimed at young students. These plans are designed to provide financial protection at a time when many students are pursuing higher education and may have education-related liabilities.
The key question for students and their families is whether buying term insurance at this stage is necessary or whether it makes sense to wait until the student starts earning and takes on financial responsibilities.
Education loans can create a need for insurance
Higher education can involve a substantial financial commitment, with many families relying on education loans to fund tuition and other expenses. Parents may either finance these loans themselves or co-borrow with their children.
In such cases, the death of a student could leave the family responsible for an outstanding education loan. A term insurance policy can provide a financial cushion to the family and help meet such liabilities.
However, the need for insurance depends largely on the student’s financial circumstances. Those without significant liabilities or financial dependents may have less immediate need for life cover.
Term plans available for young students
Premiums for young policyholders can be relatively low because age is an important factor in determining term insurance costs.
For example, premiums for a ₹50 lakh cover over a 40-year policy term, based on the plans shown, range from ₹387 to ₹479 per month for a 20-year-old. For a 25-year-old, the monthly premiums range from ₹523 to ₹609.
Among the plans listed, HDFC Life’s Click 2 Protect Supreme Plus has the lowest monthly premium for both age groups, at ₹387 for a 20-year-old and ₹535 for a 25-year-old.
ICICI Prudential Life’s iProtect Smart Plus costs ₹477 and ₹583 per month for the respective age groups, while Axis Max Life’s Smart Term Plan Plus costs ₹479 and ₹609. TATA AIA’s Sampoorna Raksha Promise costs ₹453 for a 20-year-old and ₹523 for a 25-year-old.
The premiums are indicative and can vary depending on factors such as underwriting, policy terms and the applicant’s profile.
Eligibility depends on insurer and student profile
Eligibility for student-focused term insurance can differ among insurers. Factors such as the student’s age, educational course, college and potential future earnings may be considered.
Some insurers may also take the parents’ income into account while evaluating the application.
For coverage of around ₹25 lakh to ₹50 lakh, financial underwriting may generally not be required, while applications for higher sums may involve a closer assessment of the family’s financial profile.
When should a student consider term insurance?
A student may consider term insurance if he or she has taken a substantial education loan and the family could face difficulty repaying it in the event of the student’s death.
The case for buying a policy is also stronger if the student already has financial dependants or other significant liabilities.
On the other hand, term insurance may be less relevant for a student who has no substantial financial obligations and does not have anyone financially dependent on them.
Low premium does not automatically mean necessary
While buying term insurance at a young age can lock in relatively low premiums, affordability alone should not determine the decision.
Students and parents should first assess whether there is an actual financial liability that needs protection. If there is no significant loan, liability or dependant, the immediate need for life insurance may be limited.
The decision should therefore be based on the student’s financial responsibilities and the family’s ability to manage outstanding liabilities, rather than simply on the availability of low-cost term insurance.
