Student term insurance: Is life cover worth it before you start earning?

Student term insurance may be affordable, but is it necessary? For those with education loans or dependants, early cover can offer a financial safety net. For others, the need may be limited.

Term insurance is no longer being positioned only for salaried people with families. A new student-focused offering is bringing life cover to people aged 18 to 25, including those who may still be studying and have not started earning. But for students, the key question is not whether premiums are cheap. It is whether there is a financial liability that needs to be protected.

 

Policybazaar on August 19 launched a dedicated Student Term Plan in partnership with insurer partners. The product provides life cover starting from Rs 25 lakh, with policy terms of 30 to 40 years. According to the company, premiums can start at Rs 388 a month for Rs 50 lakh cover for an 18-year-old buying a 30-year policy, provided the person is a non-smoker with no pre-existing diseases.

 

 

The plans are available to students aged 18 to 25 and allow premiums to be paid monthly, quarterly, half-yearly or annually. Critical illness and accidental death riders are also available as optional add-ons.

 

Why is term insurance being offered to students?

 

The immediate financial trigger is education debt.

 

Higher education, particularly professional and overseas courses, can require families to borrow substantial amounts. If the student is the borrower and dies while the loan is outstanding, the family could be left dealing with the repayment obligation as well as the loss of the student's future earning potential.

 

The new products are therefore aimed at covering a risk that can arise before a student has a conventional salary.

 

“Students represent the most underserved segment in Indian insurance,” Vivek Jain, chief business officer of Policybazaar, said in the company’s announcement about the policy. He cited education loans and family responsibilities as some of the reasons young Indians may need financial protection.

 

The plans also attempt to address a practical problem: students may not have their own income to demonstrate financial capacity. ICICI Prudential Life Insurance said its student offering can use parents’ income as proof of financial capacity for eligible applicants.

 

The main attraction: Locking in a lower premium early

Age is an important factor in term insurance pricing. A younger and healthier applicant can generally access cover at a lower premium than someone buying the same cover later in life.

 

The Policybazaar announcement says the premium advantage is one of the principal benefits of purchasing term insurance early, with premiums remaining fixed for the policy term once the cover is issued.

 

That can make an early policy attractive for someone who expects financial responsibilities to rise sharply after entering the workforce.

 

However, a low premium by itself is not a reason to buy life insurance.

 

Should every student buy a term plan?

 

No.

 

Life insurance is primarily meant to replace the financial value of a person's income or protect people who depend on that income. A student with no debt, no dependants and no significant financial obligation may have a limited need for a large life cover.

 

For such a person, building an emergency corpus and ensuring adequate health insurance may be more immediate priorities.

 

The calculation changes if the student has a sizable education loan, has co-borrower obligations, contributes financially to the family or expects the family to face a significant liability if the student dies.

 

In that situation, term insurance can act as a financial backstop. The amount of cover, however, should be linked to the actual liability and the family's financial position rather than simply choosing the highest cover available.

 

What should students check before buying?

 

Students considering these policies should examine:

 

Loan liability: Check the outstanding education loan and its tenure before deciding the sum assured.

 

Policy term: A 30- or 40-year policy can extend well into the applicant's working life, so the term should match the expected period of financial responsibility.

 

Premium commitment: A student should consider whether the premium will remain affordable once the policyholder starts earning and takes on other expenses.

 

Riders: Critical illness or accidental death riders increase protection but also add to the cost. They should be assessed separately rather than added automatically.

 

Policy conditions: Applicants should understand exclusions, medical requirements, claim conditions and the circumstances under which the cover applies.

 

The student term insurance category is effectively bringing forward the point at which young Indians can start thinking about life cover. But the decision should remain need-based. For a student carrying a large education loan, early protection can make financial sense. For one without meaningful liabilities, buying a long-term life policy simply because it is inexpensive may not be the best use of limited money.

 

The product is currently available online through Policybazaar, where the company says students can compare, customise and purchase the plans digitally.