Dilemma of taking term insurance till age 60/70/85/100 years


Generally, term insurance cover is supposed to be taken till the age of 60 because 60 is considered to be the age of retirement in India. It is also presumed that by the time one turns 60, the person would have fulfilled all his responsibilities, saved enough to lead a contended retired life and acquired the necessary amount of wealth that he/she can pass on to his family as an inheritance.

Is there any harm if one decides to give out an additional inheritance to their family by taking term insurance till the age of 70/85/100 (as everyone seems to be sure that he/she will die by the age of 100), that too by paying some extra premium? This is a normal thought process when one thinks of buying term insurance beyond the age of 60.

But does a person actually leave an inheritance through term insurance coverage beyond age 60?

Suppose, I am 36 years old and take term insurance of 1 crore till the age of 100, instead of taking it till the age of 60.

In case of my untimely death before the age of 60, I am just going to pay an additional premium only as I have taken the policy till age 100. (Premiums of term policies till age 100 are much higher than till age 60)

If I die at the age of 70, the value of 1 crore would be 14 lakhs, with the assumption of inflation rate at 6%. (The value of 1 crore would be around 14 lakhs after 34 years in today’s cost. That is the impact of inflation).

However, if I die at the age of 80, the value of 1 crore would be reduced to only 8 lakhs.

If I die at the age of 90, the value of 1 crore would be reduced to just 4.3 lakhs.

In reality, this is the only additional inheritance amount that you may be leaving behind for your family (Not the 1 Crore amount in today`s value) if you intend to extend your coverage beyond 60.

This is with the baseline assumption that there would be an inflation of 6%. In such cases, the value of money would be exactly half every 12 years.

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