Why Buying Term Insurance Early Is Always a Smart Move
Mini Balakrishnan
When is the right time to secure the financial security of your loved ones? “As soon as possible” is perhaps the best way to answer this question. In the wake of recent global pandemics, it is clearer than ever that having a good life insurance policy is an absolute must.
Purchasing a life insurance policy would be the last thing on your mind if you were young, perhaps in your 20s or early 30s. Since you are healthy and don’t have any financial obligations, you could think you don’t need insurance coverage right now. However, experts advise purchasing term insurance as soon as possible.
Even though you might not have any obligations or responsibilities right now, you will in the future. Giving your loved ones ample financial security in the event of your passing is an essential component of prudent financial planning. This may be accomplished by getting a term insurance plan. Hence, in this article, we’ll cover the meaning of term insurance and why you should consider investing in one.
What Is Term Insurance?
If you’re wondering what term insurance is, it is a form of life insurance policy that offers protection for a predetermined “term” of years or a certain amount of time. A death benefit will be paid if the insured passes away within the time frame stated and the policy is “in force” or active.
Compared to permanent life insurance products like whole life and universal life, term insurance is substantially less expensive initially. This is due to the fact that it isn’t made to last until old age when life insurance rates are the most expensive. Term insurance also has no financial value, in contrast to the majority of permanent insurance options.
5 Reasons To Buy Term Insurance Policy Early In Life
Term insurance provides confidence that the financial future of your family is safe. In the case of your tragic mortality, the insurer will pay the sum insured to your designated beneficiary. If you are still unsure as to why you need term insurance today, then consider the following points.
1. Premiums For Term Insurance Policies Are Low
Early-term plan purchases are rewarded with lower monthly payments. Term life insurance is inexpensive for those in their twenties who are in good health and have no significant medical history. Those getting on in years and at risk for developing age-related ailments will have to shell out more money for health insurance.
Once you get insurance, your rates will remain constant throughout the policy’s duration. If you get term insurance while you are younger, you will pay less overall for the same coverage as an older person who waits until they are older.
For instance, assume you’re interested in a Rs 1 crore term insurance policy that covers you from age 18 to 75. If your expected annual premium is roughly Rs 6,000 at age 25, you may expect to spend around Rs 10,000 once you reach the age of 30. If you’re 45, the annual cost for the same level of coverage will be Rs 30,000.
Here’s the average term insurance calculator based on age:
| Coverage Amount | Age | Yearly Premium |
| ₹1 crore | 25 | ₹8,000 |
| ₹1 crore | 30 | ₹10,000 |
| ₹1 crore | 35 | ₹15,000 |
| ₹1 crore | 40 | ₹20,000 |
| ₹1 crore | 45 | ₹30,000 |
NOTE: Term life insurance premiums take into account the insured's age, health, and the insured's ability to financially support themselves.
If you acquire the same insurance when you are 35 instead of 25, then you will be required to pay an additional Rs 2 lakh for it. Therefore, making purchases in advance results in greater cost savings.
2. Secure A Financial Future For Dependents
If you are the primary income for your family, waiting to get life insurance might put them in a terrible financial position. Furthermore, as was previously said, the cost of a life insurance policy would increase dramatically if you wait. Therefore, you may rest easy if you invest in more affordable term insurance while young.
3. Reduce The Likelihood Of Policy Failure
As we age, we become more vulnerable to various illnesses. If you put off buying life insurance and then develop health problems, it might raise your premiums even more or cause your coverage to be rejected (depending on your situation). The best way to prevent these problems is to begin collecting insurance at an early age when the risk of incurring medical expenses and the cost of the premium are often lower.
4. Receive The Tax Advantage From The Beginning Of Your Career
Purchasing term insurance is the best way to ensure your loved ones are taken care of monetarily in the event of your untimely passing.
Below are the three tax advantages of term insurance:
- Section 80C:
The policy’s premium payments are tax-deductible under this provision. The largest pool of tax deductions is in Section 80C, where you may deduct up to Rs 1.5 thousand from your taxable income.
- Section 80D:
Insurance premiums, including those for critical illness riders, are eligible for this discount. In India, your premium might be deducted up to Rs 25,000.
- Section 10 (10D):
After the policyholder passes away, the nominee may collect the amount insured and take advantage of this tax break. You may keep the whole sum since it is tax-free.
5. Establish A Solid Economic Foundation
Suppose the borrower passes away during the period of a large, expensive debt like a mortgage. In that case, the surviving family members might be left in a difficult financial position if proper insurance coverage was not in place beforehand.
Term life insurance is often used as security for large loans. Suppose you find a term life insurance policy with a high sum assured and reasonable premiums. In that case, you’ll have more money toward other important financial goals, like saving for an emergency fund, investing wisely, or making a large purchase, like a car or house. Investing in a term life policy while you’re young may help you build a solid financial foundation that will serve you well throughout your life.
Essential Tips for Choosing Term Insurance in India
There are multiple reputed insurance providers in India, like LIC term insurance policies and more. That said, while purchasing term insurance, you must consider the following:
1. The Suitable Coverage
For a contingency plan to be effective, it must take inflation into account, and the amount of coverage you choose must reflect this. Make sure to leave behind less of a safety net than is necessary by ignoring the number of individuals needing it. The recommended coverage amount is twenty times your annual income.
2. The Relevant Policy Term
The length of service you select must guarantee complete protection for your dependents in the event of your unavoidable absence.
3. The Best Add-Ons
Find out what benefits the company offers besides life insurance. Examine the available riders to see what types of customizations are available. Think about the potential long-term impacts of each of these on your life. Your policy can be tailored to your needs with the help of the right rider.
4. Percentage of Claim Settlement
Doing this study is crucial. If you want your family to have the best chance at collecting on the policy’s benefits, you should buy term insurance from a company with a high claim settlement ratio.
Conclusion
Term life insurance is a necessary financial instrument ̧you must get sooner or later. But, if obtaining term life insurance early on means paying less, enjoying tax advantages from the start of your career, providing coverage for your family earlier, and so on, why not take advantage of it?
FAQs
1. When should you purchase term insurance?
The optimal age to get a term life insurance policy is in the early twenties. This is the age at which many college graduates begin generating income. Purchasing term insurance at this age will guarantee the policyholder’s future and instill in them excellent saving habits.
2. At what age should term life insurance be terminated?
According to financial experts, it is considered fine to have a life insurance policy until age 65, but after that, you should rely on pensions and savings for income.
3. Is twenty-year term life insurance cost-effective?
In general, 20-year term life insurance is less expensive than permanent life insurance and offers greater flexibility if you decide to transfer or extend your coverage in the future. It is a good solution for meeting your long-term requirements.
4. Does term life insurance lose value?
Term life insurance is often less expensive than permanent whole life insurance, however, term plans have no cash value, no payout when the term expires, and no value other than the death benefit.
