Life insurance is a must-have for most individuals. In fact, some suggest even college students who expect to have dependents soon to buy insurance early.
However, buying a life insurance policy, especially term insurance, is not that easy for college students. Term insurance, typically, offers a large cover at a relatively cheaper price.
Contrary to popular belief, insurance is required by anyone with financial dependents. Students, typically, do not consider life insurance or financial planning seriously because of their lack of knowledge in this area.
Several students travel abroad for higher studies. An existing insurance cover would provide some cushion to the family back home, as getting an insurance cover in another country may not be easy.
“If the policy is underwritten and the risk accepted in India, then the policy remains valid even if the student moves to another country to study,” says Karthik Raman, chief marketing officer and head of products, Ageas Federal Life Insurance.
Moreover, students who take an education loan for higher studies and plan to repay the loan on their own can take a cover equal to the loan amount to ensure the burden doesn’t fall on the parents or guardians in case something unfortunate happens.
Nitin Mehta, Chief Customer Officer, Bharti AXA Life insurance, said, "Students or people with no or less income can get covered under some governmental schemes which require very minimal investment. Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) is one such scheme where parents or grand parents pay the premium and children get life insured."
Experts say that buying insurance at a young age ensures that the premium rate is low.
“One of the biggest reasons one should take a life insurance policy early is that the cost of insurance increases with age. The premiums that a student will pay at an age, of say, 18, will be much lower than the premiums that they will pay at the age of 35,” says Yogesh Aggrawal, founder of Onsurity, a health-tech and insurance company.
One of the most significant barriers for college students buying life insurance is that many of them do not have a proper source of income.
Buying life insurance is a simple process, but the income is a big criterion that insurers assess before issuing a policy. That’s because the underlying concept of life insurance is to replace the income of the breadwinner in case of their demise. Insurers, therefore, often use the income criterion to assess the amount of sum assured.
“An individual needs to have legitimate income proof in order to purchase a term insurance policy. In order to avail oneself of a term insurance policy, one needs to have income and proof,” says Sajja Praveen Chowdary, business head, term life Insurance, Policybazaar.com, an insurance aggregator.
Students who have a source of income, even if it is not from a regular source, and is freelance in nature, may be eligible to buy a policy. However, insurers may not sum up multiple sources of income to offer a larger cover.
“Term insurance can be obtained if the income they earn from one source is sufficient to satisfy the minimum income requirement of the insurer. A sum of all income sources will not be considered as proof of income,” says Chowdary, adding that the proof of ITR filed can be used to show proof of income.
Also, buying insurance policies other than a term cover may be easier, as the cover amount in such policies is usually lower for the same amount of premium.
Says Akshay Dhand, appointed actuary at Canara HSBC Life Insurance, “Typically, students with no or less income will not get any term plan, and if they do, most companies will provide them with very little sum assured. However, such individuals can opt for savings plans being offered by life insurance companies. This at least suffices the requirement of life insurance for such individuals till the time they start earning an active income.”
Another option is for parents or guardians to buy a policy on the student’s behalf. Here, the premium amount will be paid by the parent or guardian, and the policy will be in the name of the child.
“For such individuals, the policyholder will be the parent or a grandparent, who will fund the premiums, but the policy will cover the remaining lives of these individuals,” says Dhand.
