Term insurance for students: why insurers are selling life cover before careers begin

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Term insurance has traditionally been associated with people who earn, have dependants or carry financial liabilities. But a few insurers are now offering term cover to students as young as 18.

At first, this may seem unusual. Students typically have no income or dependants. But the equation changes when higher education involves a large financial commitment, whether through an education loan or family savings. This has led to the emergence of student-focused term insurance, offering life cover to young adults while they are still studying.

An education loan is not a prerequisite. Students aged 18-25 qualify for it as long as they meet underwriting criteria.

But does every student need term insurance ? How much cover can they get without an income? How are they underwritten? And does it make sense to buy a policy before starting a career?

Axis Max Life Insurance, ICICI Prudential Life Insurance, HDFC Life and Tata AIA Life Insurance have introduced term insurance plans that can be bought by eligible students. These include Smart Term Plan Plus, iProtect Smart Plus, Click 2 Protect Supreme Plus and Sampoorna Raksha Promise, respectively.

Bandhan Life does not have a product specifically labelled as student term insurance, but it offers term insurance to eligible students. However, being a graduate is its minimum eligibility requirement, while other insurers may offer cover to undergraduates as well.

“Our top advisors brought this proposition to us. We found that parents often drive this need, given the heavy financial burden of higher education and the large number of students taking education loans. Just as any liability needs risk coverage, we explored offering reasonable term insurance to students,” said Vaibhav Kumar, head of products, e-commerce and enterprise COE at Axis Max Life Insurance.

Around 1,000 students have bought term insurance in the last three to four months from our platform, according to Varun Agarwal, head of term insurance at Policybazaar.

Student term insurance is no different from regular term insurance. The insurer pays the death benefit if the policyholder dies during the policy term.

These plans too come with additional frills that can vary from one insurer to another. These include personal accidental cover, payout on terminal illness, premium waiver and wellness benefits.

“When comparing insurers, look at two things: trust markers such as claim settlement ratio, complaint ratio, total claim amount settled and solvency ratio. And value-for-money markers such as product features and premium,” said Agarwal.

“Some plans provide free benefits at no extra cost: 100% payout on terminal illness, waiver of future premiums on terminal illness, the option to defer 12 months of premium, and wellness benefits such as annual health check-ups, doctor teleconsultations, cancer screening and discounts on pharmacy and lab tests,” he added.

Term insurance requires financial and medical underwriting. Most students in the 18–25 age group have little or no personal income.