Student Term Insurance: Is It Worth It for Young Adults?

Thinking about term insurance before you even land your first job? Now, you can. Term insurance is now available for individuals aged 18 to 25, including students who haven’t started earning yet.

This new offering primarily aims to protect against financial liabilities, especially growing education debt. Policybazaar, collaborating with insurer partners, launched a dedicated Student Term Plan on August 19 to serve this segment.

Key Details of the Student Term Plan

• Life cover: Starts from Rs 25 lakh.
• Policy terms: Ranges from 30 to 40 years.
• Example premium: An 18-year-old non-smoker with no pre-existing conditions could get a Rs 50 lakh cover for 30 years for just Rs 388 per month.
• Payment flexibility: You can pay premiums monthly, quarterly, half-yearly, or annually.
• Optional additions: Critical illness and accidental death riders are available.

The main reason for these student-focused plans is the increasing burden of education loans, particularly for professional and overseas courses. If a student borrower passes away, their family could face significant loan repayment obligations and the loss of potential future income.

Vivek Jain, Policybazaar’s Chief Business Officer, noted that students are an underserved segment in Indian insurance, often needing financial protection due to these loans. To help students without their own income proof, ICICI Prudential Life Insurance’s offering allows parents’ income to be used as proof of financial capacity.

Why Consider Early?

One major benefit of buying term insurance young is locking in lower premiums. Your age is a crucial factor in pricing, and premiums remain fixed for the policy term once issued, which can be attractive as you anticipate future financial responsibilities.

However, a low premium alone isn’t a sufficient reason to buy life insurance. Life insurance is primarily meant to replace income or protect dependents, so consider your actual need.

If you’re a student without debt, dependents, or significant financial obligations, extensive life cover might not be necessary right now. For you, focusing on building an emergency fund and securing adequate health insurance could be more beneficial.

Is It Right For You? Key Questions

Before you decide, here are some important factors you should carefully evaluate:

• Education loan liability: What is your outstanding loan and its tenure? This helps determine the right sum assured.
• Policy term: Does the 30-40 year term align with your expected period of financial responsibility?
• Long-term affordability: Can you afford the premiums once you start earning and have other expenses?
• Riders: Are critical illness or accidental death riders truly necessary for you, as they add to the cost?
• Policy conditions: Understand all exclusions, medical requirements, and claim procedures.

Ultimately, while student term insurance encourages young Indians to consider life cover sooner, your decision must always be based on your personal financial needs.