- Date : 16/01/2021
- Read: 5 mins
In a world full of uncertainties, buying a term insurance plan with affordable premiums and longer coverage at a younger age might just be your wisest financial decision.
As an adult in your 20s or early 30s, buying term life insurance is rarely taken into account while drawing up a financial plan. In the early stages of your career, when you’re in great health and don’t have too many responsibilities, you may think buying insurance is not important and that it can wait.
However, this is not true. The key to planning for the future from a young age is to strike a balance between enjoying a great life while being financially responsible. Just like building a strong financial foundation, creating an emergency fund, or saving for a retirement corpus, buying a term insurance plan must be prioritised early on.
Here’s why buying life insurance at a young age is a smart move.
Related: Different types of term insurance plans
Pay lower premiums
One of the most significant advantages of buying term insurance early is that premium amounts are directly proportionate to your age. Insurance companies consider your health while deciding the premium. In general, young adults enjoy better health and are less prone to illnesses, but tend to develop health complications as they grow older. This means insurance companies are likely to charge you a higher premium when you are (say) in your 40s. It is recommended that you get insurance cover as early as possible – even your 20s – so that you can get covered for longer at a fraction of the price.
Enjoy better coverage by locking in a lower premium
The ideal amount of insurance cover is defined as at least 20 times your annual income. When you buy a policy, the premium amount is constant throughout its tenure. So, by purchasing a term insurance policy early, you lock in a lower premium and pay much less in total. For example, for an insurance cover worth Rs 1 crore till the age of 75, a 25-year-old would have to pay appropriately Rs 8,000 annually, which amounts to Rs 4 lakh over a period of 50 years. However, for the same kind of coverage, a 35-year-old would have to shell out approximately Rs 15,000 per year, which means paying Rs 6 lakh for the tenure of the policy. Undoubtedly, you can save more money on your policy if you buy it at a younger age.
Related: Have you heard about term plans that pay you back?
Ensure security for your dependents early on
The future is unpredictable, and by waiting too long to get term insurance, you would be leaving your family vulnerable. It is important to plan for their financial security as early as possible. You may not have many responsibilities in your 20s, but as you grow older, they are bound to increase. You may decide to get married, have children, take on loans, or need to look after ageing parents who are financially dependent on you. Without a term insurance plan, your dependents could be in a tight spot and might have to drastically compromise on their lifestyle in case you unexpectedly pass away. Buying term insurance early on can take some pressure off of you and give you peace of mind.
Reduce dependence on your employer's term insurance
While it is great to have an employer who contributes a term plan, it might be better to get another term plan to supplement it and fully cover your needs. Having your own term plan means that you are always covered, even if you decide to switch jobs. For instance, what if your new employer doesn’t offer the same benefit? Since it’s not mandatory for employers to offer term insurance, it’s best to treat it as a booster to your plan and not as a replacement.
Enjoy tax benefits early in your career
Along with financial protection for you and your family, term insurance offers tax benefits, thereby letting you save more of your income. Here’s how you can take advantage of tax savings:
- Under Section 80C: The premium that you pay for your term insurance plan can be deducted from your total income. This brings down your taxable income, thereby also reducing your tax liability. You can claim up to Rs 1,50,000 of your insurance premium as a deduction under this section.
- Under Section 80D: You can claim deduction up to Rs 25,000 for premiums paid towards health-related coverage, such as critical illness riders.
- Under Section 10D: You can claim tax exemption on the proceeds received. The entire amount is completely exempt from tax, subject to certain conditions.
Last words
Life is full of challenges. You never know when it can throw a curveball at you. That’s why it’s important to ensure your family’s financial security by planning ahead. Term life insurance is an essential part of any financial plan, and it is best to purchase it as early as you can. By doing this, you can rest assured that your loved ones can continue to lead the lifestyle they are accustomed to even if you are not around.
Also read: Easy ways to buy a term insurance policy
As an adult in your 20s or early 30s, buying term life insurance is rarely taken into account while drawing up a financial plan. In the early stages of your career, when you’re in great health and don’t have too many responsibilities, you may think buying insurance is not important and that it can wait.
However, this is not true. The key to planning for the future from a young age is to strike a balance between enjoying a great life while being financially responsible. Just like building a strong financial foundation, creating an emergency fund, or saving for a retirement corpus, buying a term insurance plan must be prioritised early on.
Here’s why buying life insurance at a young age is a smart move.
Related: Different types of term insurance plans
Pay lower premiums
One of the most significant advantages of buying term insurance early is that premium amounts are directly proportionate to your age. Insurance companies consider your health while deciding the premium. In general, young adults enjoy better health and are less prone to illnesses, but tend to develop health complications as they grow older. This means insurance companies are likely to charge you a higher premium when you are (say) in your 40s. It is recommended that you get insurance cover as early as possible – even your 20s – so that you can get covered for longer at a fraction of the price.
Enjoy better coverage by locking in a lower premium
The ideal amount of insurance cover is defined as at least 20 times your annual income. When you buy a policy, the premium amount is constant throughout its tenure. So, by purchasing a term insurance policy early, you lock in a lower premium and pay much less in total. For example, for an insurance cover worth Rs 1 crore till the age of 75, a 25-year-old would have to pay appropriately Rs 8,000 annually, which amounts to Rs 4 lakh over a period of 50 years. However, for the same kind of coverage, a 35-year-old would have to shell out approximately Rs 15,000 per year, which means paying Rs 6 lakh for the tenure of the policy. Undoubtedly, you can save more money on your policy if you buy it at a younger age.
Related: Have you heard about term plans that pay you back?
Ensure security for your dependents early on
The future is unpredictable, and by waiting too long to get term insurance, you would be leaving your family vulnerable. It is important to plan for their financial security as early as possible. You may not have many responsibilities in your 20s, but as you grow older, they are bound to increase. You may decide to get married, have children, take on loans, or need to look after ageing parents who are financially dependent on you. Without a term insurance plan, your dependents could be in a tight spot and might have to drastically compromise on their lifestyle in case you unexpectedly pass away. Buying term insurance early on can take some pressure off of you and give you peace of mind.
Reduce dependence on your employer's term insurance
While it is great to have an employer who contributes a term plan, it might be better to get another term plan to supplement it and fully cover your needs. Having your own term plan means that you are always covered, even if you decide to switch jobs. For instance, what if your new employer doesn’t offer the same benefit? Since it’s not mandatory for employers to offer term insurance, it’s best to treat it as a booster to your plan and not as a replacement.
Enjoy tax benefits early in your career
Along with financial protection for you and your family, term insurance offers tax benefits, thereby letting you save more of your income. Here’s how you can take advantage of tax savings:
- Under Section 80C: The premium that you pay for your term insurance plan can be deducted from your total income. This brings down your taxable income, thereby also reducing your tax liability. You can claim up to Rs 1,50,000 of your insurance premium as a deduction under this section.
- Under Section 80D: You can claim deduction up to Rs 25,000 for premiums paid towards health-related coverage, such as critical illness riders.
- Under Section 10D: You can claim tax exemption on the proceeds received. The entire amount is completely exempt from tax, subject to certain conditions.
Last words
Life is full of challenges. You never know when it can throw a curveball at you. That’s why it’s important to ensure your family’s financial security by planning ahead. Term life insurance is an essential part of any financial plan, and it is best to purchase it as early as you can. By doing this, you can rest assured that your loved ones can continue to lead the lifestyle they are accustomed to even if you are not around.
Also read: Easy ways to buy a term insurance policy
