Is Income Proof Mandatory for Buying a Term Insurance Plan?

Written by : Knowledge Centre Team

2025-12-13

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Protecting the family from financial burdens when you are no longer there is a smart choice, and term insurance excellently aids it. However, before you begin with the purchase, understand that the insurer will ask for income proof. Learn why it is important and how it can enhance your chances of accessing better coverage and budget-friendly premiums. In this blog, you can explore the importance of income proof for term insurance and ways to make an informed decision.

Key Takeaways

Proof of income is crucial for approval of term insurance. It helps the insurer assess and understand your financial capacity
It is used to check your eligibility for coverage because it is linked, to your annual income. Coverage is usually 10 to 15 times your total earnings
Homemakers can still qualify for term insurance without a fixed salary by providing evidence of other sources of income
Proof of income can include your salary slip, tax returns, and statements
Some insurers may reduce your coverage due to the lack of income proof because they come with certain conditions and restrictions

Can You Buy a Term Insurance Without Income Proof?

Income proof is mandatory for buying a term plan. This is because the purpose of term life insurance coverage is to offer financial safety to your family. The amount of financial support you can buy as term insurance cover depends on your capacity to earn. Your income provides the basis for understanding your financial status.

Therefore, you need to provide proof of a regular income if you are buying term insurance coverage. However, you don’t need to be salaried or self-employed to have income and proof of income.

Even homemakers, who receive interest income, a pension, or rent, can apply for term insurance with their proof of income.

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Term Plan Eligibility

Term insurance eligibility is decided through an insurer’s underwriting process, which typically checks the following before issuing a policy:

Age: Entry age typically starts at 18, with a maximum around 65; some plans also allow a higher maturity age.
Income: Income proof (such as salary slips or ITR) is typically used to show premium-paying capacity and to decide the maximum cover you may be offered.
Health: Insurers evaluate your medical history and current conditions (e.g., diabetes or cardiac issues) and may ask for medical tests; smokers generally pay more due to higher risk.
Occupation: If you work in a high-risk profession (e.g., construction or mining), premiums may increase, or the proposal may be declined.
Lifestyle: Habits such as smoking can materially affect risk assessment and premium rates.
Citizenship/Residency: Indian residents and NRIs can typically apply, but eligibility requirements and documentation may vary by insurer and plan.

In practical terms, eligibility for term insurance is not only about meeting the entry-age criteria; it also depends on whether the insurer is comfortable with your overall risk profile and the cover amount you’re applying for.

Factors That Can Affect Term Insurance Plan Eligibility:

These factors influence whether your application is accepted and can also impact the sum assured you qualify for and the premium you pay.

High-risk occupations: Jobs like mining or hazardous chemical handling
Pre-existing medical conditions: Ongoing/chronic illnesses
Smoking/tobacco use: Treated as a higher-risk profile
Significant debts/liabilities: May limit the cover amount you’re eligible for

Income and Term Insurance Eligibility:

Your annual income determines the maximum term insurance you can avail of. The maximum term insurance coverage eligibility ranges from 10 to 15 times your annual income. Thus, if your income is ₹Rs 10 lakhs per year, you can avail of a term insurance cover of ₹ 1 crore to ₹1.5 crores.

Documents Required for Buying a Term Insurance Plan:

The following documents qualify as income proof for the term plan:

Salary slip (minimum for the last three months)
Income Tax Returns (ITR) (for the last three assessment years)
Bank statement showing your salary/income (for the last six months)
Most recent Form 16
Audited profit & loss account and balance sheet (for the last three assessment years)
Latest salary certificate from your employer
CA Certificate (not more than 2 months old)
Agricultural income certificate (not more than 1-year-old)
Land records and Income Assessment (current)
Form 26 AS (last financial year)
Mandi Receipts (last 2 months)

Did You Know?

Over the past two years, the number of women purchasing term insurance in India has surged by 80%, with many opting for coverage exceeding ₹2 crore.

Source: Live Mint

Term Insurance With vs. Without Income Proof

When you are purchasing a term insurance plan, you must provide the insurer with your income proof because of its importance in determining your eligibility and coverage limit.

Here’s a comparison of how its presence or absence could alter your plan:

Basis	With Income Proof	Without Income Proof
Coverage Amount	You can get higher coverage based on your annual income (typically 10 to 15 times more than your annual income)	Your coverage may be restricted or capped at a lower sum assured, as it would be difficult to determine the coverage.
Policy Options	You will find a boarder range of policies to choose from and access comprehensive benefits	You will be limited offered limited policy options, subject to a few additional conditions
Approval Process	The insurers will be able to assess your financial risks accurately, and the approval process will be faster	The scrutiny will be time-consuming when you apply for the plan
Premium Rates	The insurers will offer you lower premiums because the precise risk will be carefully evaluated	You will be required to provide alternative documents such as rental income records, pension receipts, or agricultural income certificates

How Much Term Insurance Do You Need?

If you’re wondering, “How much term insurance do I need?” a practical approach is to estimate your family’s required corpus and then select a sum assured that fits your long-term budget.

A simple method:

Add outstanding liabilities (home loan, personal loans, education loans).
Add key goals (children’s education, spouse’s long-term support, emergency buffer).
Add income replacement needs (annual expenses × number of years you want to protect).
Subtract existing protection and assets (existing life cover, savings/investments earmarked for goals).

This approach helps you select a cover aligned with your real needs. It supports smoother underwriting, as the chosen sum assured typically aligns more closely with income eligibility for term insurance and overall term insurance eligibility expectations.

Conclusion

If you have a stable income, you should not hesitate to provide proof of it, as it can help you secure better coverage at an affordable premium. It will also help you select the plan that suits your needs and budget. However, if you do not have conventional proof of income, alternative options are available.

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance is a strong choice for those seeking a flexible policy with extensive coverage. It even includes additional riders to support your various financial goals. If you are looking for term insurance, this plan can be a perfect fit.

Glossary

Income proof: Documents that verify your total earnings used to determine coverage eligibility for term insurance
Sum Assured: The guaranteed sum paid to the beneficiaries in case the policyholder passes away during the term
Form 16: A TDS certificate issued by an employer showing salary paid and tax deducted/deposited for the FY
Form 26AS: A tax credit statement that holds essential details related to tax deducted on your income
Mandi Receipts: The proof of agricultural produce sales, which is also used as proof of income for farmers

FAQs

There is no minimum salary for term insurance. Insurers request proof of income, such as salary slips or ITR, to assess premium-paying capacity and determine coverage. The sum assured is commonly set at 10-15 times the annual income. Some insurers consider incomes of around ₹2-3 lakh and may also offer plans for homemakers based on alternative income sources or a financial evaluation. Still, there are no specific income criteria for term insurance.

Insurers evaluate income eligibility for term insurance to confirm your ability to pay premiums and to determine an appropriate sum assured. This assessment uses documents such as salary slips, ITR, or bank statements. Although no standard minimum income for term insurance is prescribed, insurers typically apply an income multiplier (often 10-25 times annual income), adjusted for age and existing policies, to ensure coverage reflects financial obligations, including debts and family needs.

To apply for term insurance, insurers typically ask for the following:

Proof of Identity: Aadhaar, PAN, Passport
Proof of Address: Utility bill, Aadhaar, Passport
Proof of Age: Birth certificate, Passport, school or education certificate
Income Proof: Salary slips, ITR, bank statements
Photographs: Recent passport-sized photos
Health Records (if required): Medical reports for risk assessment

Select a term insurance cover that is 10-15 times your annual income. Increase it if you have significant liabilities, such as loans or education costs, and consider a lower cover if you already have substantial investments. Use approaches such as Income Replacement or a Needs-Based Analysis to tailor coverage, ensuring it replaces lost income and supports future expenses for dependents.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.