Can You Buy a Term Insurance Plan Without Income Proof?

Term insurance is the most basic type of life insurance that secures your loved ones with life cover for a specific policy term. Term plans are the most affordable and accessible form of life insurance available in India. Moreover, the life cover you get from a term plan can ensure your family’s financial security even when you’re gone.

Of course, the number one responsibility of any breadwinner is to secure their family’s financial security. And the best way to protect your family from future uncertainty is to get a term life insurance plan that provides adequate life cover.

However, buying a term plan is not a direct transaction. Most life insurance providers will require you to provide certain proofs and undergo a medical examination.  

Income proof is just one of the crucial documents you will need to purchase a life insurance plan.  

But what if you have no income proof? Perhaps you are currently unemployed or don’t have a regular source of income, but still want to secure your family with a term insurance plan. Below are some questions you might have if you’re in such a situation. 

Is Income Proof Compulsory for Term Insurance? 

Yes, submitting your income proof is mandatory if you want to purchase a term insurance plan. Alternatively, you can also provide surrogate income proof such as your credit card statement, car registration statement, home ownership proof etc. that showcase your financial net worth. All insurance providers will ask for your income proof before finalizing your policy document. Here’s why income proof is mandatory for buying a term insurance plan: 

• Income proof helps the insurer determine if you are eligible for a term plan. Insurance plans require regular premiums payments to remain active, and insurance providers want to know if you can pay your premiums regularly without any financial issues.  

• Your income proof also helps an insurer verify your ‘Human Life Value’ (HLV). HLV is basically your total earning potential from now until your retirement. Generally, your life insurance cover is determined by you HLV. The coverage amount you receive should be sufficient to maintain your family’s standard of living even in your absence. Proof of income is essential data required to calculate your HLV.  

• By submitting your income proof, you are preventing yourself from being overinsured. Those who are overinsured end up paying high premiums that are not suitable for their income range. This can end up creating financial hardships later down the line when the premium amount starts cutting into your savings. Insurance providers will only offer plans that are affordable and reasonable for your current income range.  

• Income proof shows the insurer that you are a stable and reliable customer. Most insurance providers prefer clients who have a steady source of income. A steady source of income means that you can regularly pay your premiums, and the insurer will not have to worry about policy cancellation.  

What if You Don’t Have Your Own Source of Income?  

Lack of income does not mean that you have no way of securing yourself with life insurance! The most common way to get life cover without income is to have someone else purchase a policy for you. Keep in mind that a life insurance policyholder and the life insured need not be the same person. The policyholder is the one who purchases the policy, but the life insured is the one who is secured by policy’s life cover element.  

The policyholder may choose to select one of their relatives or family members as the life insured. This means that the policyholder will be the one liable for premium payments, and they will have to provide their income proof to buy the policy. The life insured will not have to share any proof of income. However, they will still have to undergo a medical examination and provide other required documents like address proof, identity proof etc.  

Documents That Can be Submitted as Income Proof 

Multiple documents can be used as valid proof of regular income. Even self-employed individuals can avail of term insurance by providing any of the documents listed below: 

• Income tax returns statement for the past 3 years 

• Bank statements from a salary account where income has been credited for at least six months 

• Salary/pay slips for 3 months 

• Accounting statement by a chartered accountant that is at least two months old 

• Most recent Form 16 

• An employment verification letter may also be submitted as income proof.  

Conclusion 

Proof of income is essential to purchase a term insurance plan that can sufficiently support your nominees in your absence. Besides proof of income, other required documents include address proof, identity proof, and medical records. You can also buy a joint life insurance plan to cover yourself and your spouse under one plan. A joint plan can is especially useful if your spouse does not have their own source of income. Edelweiss Life- Zindagi Protect Plus offers the Better Half Benefit option that allows you to get life cover for your spouse. The policy will continue to remain in effect as long as at least one life insured remains.