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coupons a">Insurance needs alter with age, but the biggest change takes place when a person turns 60 and retires. With no income, the life insurance need of a retired person is almost zero. If your senior citizen parents have life insurance policies that still have more than 5-6 years to mature, it's best to terminate the plans or turn them into paid-up policies because it's a waste of precious resources.
"They will be able to save the premium for that many years," says Jayant Pai, vice-president of Parag Parikh Financial Advisory Services. The logic is simple, even brutal. Life insurance is meant to replace the income of the policyholder. If he is not earning, where's the need to insure him?
Still, insurance agents don't tire of trying to sell life insurance to senior citizens in the garb of guaranteed income options for their retirement planning and tax saving. The next time your parents are offered life insurance, remind them that these objectives can also be achieved through simpler and less complicated products.
On the other hand, the health insurance needs of a senior citizen rise after he retires. Overnight, your parents might find themselves without the security of the health cover that their employer provided to the family till they were working.
Though companies also cover parents of employees under the group health insurance, you may find that it is not enough. Many organisations are imposing curbs on parental coverage and, in certain cases, completely withdrawing the facility, according to a recent study released by the insurance broking firm Marsh India.
"Complete sponsoring of parental coverage by companies has dropped from 51% in 2010 to 40% now," says Marsh India CEO Sanjay Kedia. "Nearly 25% of the participants insist on employee contribution now against 20% last year, while 35% of the companies have withdrawn this facility completely," he says.
This is a worrisome trend because older people are more likely to require medical care. If your parents are senior citizens, they should buy a health cover for themselves. If you buy it for them, you get an additional deduction of up to Rs 20,000 for the premium paid under Section 80D. Even if they are not senior citizens and retirement is a few years away, it's a good idea to buy a health plan so that the 2-4-year waiting period for pre-existing diseases ends by the time they retire.
Many insurers now promise a lifetime renewal. Before you fall for this, conduct a cost-benefit analysis of insuring an octogenarian parent. At that age, the premium can be prohibitively high and the exclusion clauses encompassing. It may be better to stay uninsured at 85 rather than pay a premium that is close to 25-30% of the cover it provides.
