KYC Process for Term Insurance in India

Term insurance plays a vital role in helping you financially secure your loved ones. While nothing can really compare to the loss of a loved one, it is still important to ensure that they can meet their financial goals and maintain their living standards despite your absence. If you’ve decided to apply for term insurance, then you must be aware of the KYC (know your customer) process. But do you need Aadhaar to complete KYC? This guide will cover the KYC process and list various documents that you will need while applying for term insurance.

Why is KYC Done When Buying Term Insurance?

Term insurance offers pure life insurance coverage for a specific duration or term. It offers a fixed sum assured or death benefit payout to the nominee of the policyholder, in case of his/her demise within the policy period.

When acquiring a term insurance policy, it is mandatory to submit your KYC details. This process enables the insurance company to authenticate your identity and address. Additionally, KYC details are necessary when filing a claim, surrendering a policy, or updating your nominee. All financial institutions, insurance companies included, require KYC compliance.

Is Aadhaar Mandatory?

A large number of prospective policyholders often wonder whether Aadhaar proof is required for buying term insurance plans. The answer is No.

It is not compulsory. However, since Aadhaar is a proof of both identity and address, its use has gone up steadily over time, thereby making it one of the most-accepted KYC documents in India.

Understanding the Guidelines

The IRDAI has clarified that Aadhaar is not a compulsory document for insurance products. Insurers are required to adhere to KYC norms which may be fulfilled by the submission of a variety of documents. You may provide any of the alternative documents listed below to get insurance without using your Aadhaar card.

Alternate Documents

If you choose not to use Aadhaar, you can submit other documents including:

For Proof of Identity:

• PAN card
• Passport
• Voter ID card
• Driving license

For Proof of Address:

• Utility bills (electricity, water, gas)
• Bank statements
• Rent agreement
• Passport

These alternatives are equally valid and accepted by insurers, ensuring that you can complete the KYC process without any hassles even without an Aadhaar.

Other Documents Required for Purchasing Term Insurance

To purchase term insurance, you will need to submit several documents. In addition to identity and address proofs listed above, you will need:

• Proof of Age: Birth certificate, school leaving certificate, or passport.
• Proof of Income: Salary slips, bank statements, or income tax returns.
• Medical Reports: If required by the insurer, medical examination reports to assess your health status.

These documents help insurers verify your identity, address, age, and financial status before issuing a policy.

Eligibility Criteria for Purchasing Term Insurance

While KYC is a vital part of the process, it’s important to understand the basic eligibility criteria for purchasing term insurance. Here is a closer look at the same:

• Age: Normally, most insurance companies may issue their plans to any individual between the ages of 18 and 65. However, these figures may vary depending on the insurer and the specific policy terms.
• Health Status: Depending on the company’s requirements, some insurers will require you to undergo medical tests. This helps insurers gauge your health condition and modify your premium accordingly.
• Occupation: Your term insurance premium may be affected by the nature of your job. High-risk jobs that put your health at risk can also lead to higher premium costs.
• Lifestyle: Smokers tend to have higher premium rates than non-smokers.
• Income: Some insurers require proof of income to ensure you can afford the premium payments. Moreover, your current annual income also helps determine your policy’s sum assured.

Conclusion

It’s a great choice to buy a term insurance policy for the sake of your family's financial future. Although submitting your Aadhaar is optional, it is an easy way to complete the KYC process. You can, nevertheless, use other KYC-compliant documents too, since Aadhaar is not compulsory. Understanding the eligibility criteria and documents required for term insurance will help you smoothly finish your application process. Term insurance offers peace of mind since you’ll be ensuring your family’s financial protection in case of an unforeseen mishap. So, do your homework, and compare available plans to find a policy that suits your needs.

 

Aastha Mestry - Portfolio Manager 
An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.