TomorrowMakers ™

Being an early bird counts: life insurance is not only for older people

16 March 2015
When you are young, life insurance is probably the last thing on your mind. Most likely, you might have limited responsibilities, no dependents to look after or even any debts.
 
 

Simply put, it might seem like you do not need insurance. However, here are some reasons why it makes sense to get insured early:

  • It can be cheaper if you start early:
    Life Insurance premiums are based on your age and based on the type of policy, they usually remain unchanged for the entire term of the policy. So if you are 25 years old and you buy a policy for 30 years, your premiums will mostly remain the same for the next 30 years. However, if you wait for 10 years and buy a policy at the age of 35, you will pay a higher premium for the entire term of the policy.One can consider investing in life insurance as soon as there are financial liabilities, monetary goals and expenses that one wishes to cover.
  • Your money has more time to grow:
    When it comes to finance, it is better to start young, and life insurance is no different. Starting early might allow your Endowment or Unit Linked Plan portfolios to gain from the power of compounding or from long-term growth in investment portfolios.
  • Tax benefits and bonuses:
    Premiums paid towards life insurance are tax deductible under current income tax rules. In addition, with policies like Endowments, you can gain from regular benefits and bonuses declared by the insurance company.However, there are certain annual limits to these deductions and the benefits can vary as per the provisions of the Income Tax Act. Consult your tax advisor for detailed advice.
  • You might not get insurance later:
    As you grow older, the chances of disease increase. If your health is not at par with the terms of the insurance company, you might not be able to purchase insurance or might get insurance with increased premiums and/or lower cover.
  • Policy loans:
    Sometimes, while paying off a student loan or buying a home, you might need to borrow money. In such cases, you have the option of availing a loan by pledging your life insurance policy. This way, your policy extends living benefits and acts as a financial backup.

Isn%u2019t it wise to apply for insurance while you are healthy and sure of getting covered? (also see our article on: Life insurance types simplified)

 

Tax Singh

"Tax Fact 9"

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