Benefits of Buying Term Insurance at a Young Age
- ByStartupStory | October 1, 2024
Have you ever wondered why financial gurus frequently advocate purchasing term insurance early in life? What is term insurance? Term insurance protects your family by providing economic stability in an unforeseen incident. But why should you think about it when you’re young? If you’ve just begun your profession, you may believe that insurance can wait. However, purchasing term insurance from a young age offers some significant advantages, particularly when planning for the long term. Let’s look at why obtaining term insurance early is a wise financial decision.
- Lower premiums
When you acquire term insurance at an early age, your rates are greatly reduced. This is because insurance companies’ base rates on age and health. Younger people are often healthier and less prone to develop lifestyle-related diseases, therefore the insurer’s risk is reduced. A term insurance calculator can help you see the premium difference between buying a policy at 25 versus 35. For example, a 25-year-old may pay less than a 35-year-old for the same coverage. Purchasing young locks in these cheap premiums for the policy’s duration makes it a cost-effective option.
- High coverage at affordable rates
This implies that at a younger age, one tends to get a higher sum assured (the amount paid to the family in the event of your demise) for a cheaper price. Insurance companies believe young people are less likely to get ill or be involved in an accident and this is why they can sell many policies at a cheaper rate. For instance, a young man of 25 could be offered a ₹1 crore cover for a nominal premium as compared to the same offered to a 40-year-old man. This high coverage guarantees that even with low premiums, your family will be financially protected in case you are unable to work.
- Financial stability for loved ones
The main aim of term insurance is to safeguard your family’s financial requirements in case of your demise. Your family may have problems meeting daily needs such as rent, education or health expenses if you are the breadwinner. A term insurance payout replaces your income, thereby providing the financial security that your family needs to stay afloat and pay for essential expenses in the event of your passing. This gives them the stability needed to deal with life after the demise of their loved ones.
- Securing against health risks
There are also more risks as you grow older; it is easier to contract diseases such as diabetes, hypertension, or heart ailments. Insurance premiums also increase with age because these risks are considered by the insurers as future losses. Term insurance is bought early in life, and it gets you a policy at a cheaper rate when you are still young and healthy. This way, you do not need to bother about being turned down for coverage or having to pay extremely high premiums as you advance in life and health issues crop up.
- Easier medical tests
When you apply for term insurance, most insurers require you to undergo medical tests to assess your current health condition. If you apply for the policy in your 20s or early 30s, you must face these tests because you are still young and have no critical health conditions. Later in life, medical conditions may arise, which may make it difficult to get coverage or result in high costs. These barriers are avoided when one gets insured while they are young and healthy, and this also guarantees better rates.
- Longer policy term
In case of the best term insurance in India when you purchase it at a young age, you have the option of choosing a longer policy period. For instance, if you buy a policy at the age of 25 or 30 years, this means that you have the opportunity to select coverage that will be needed for 30 or 40 years. This means the family will be financially secure for a longer time, say till you are financially ready for retirement, or your children are financially on their own. Long policy term ensures that individuals have long-term security for their loved ones as they will not be required to renew policies frequently.
- Financial discipline
It is wise to start your financial planning at an early stage with a term insurance policy in place. On the other hand, you have to allocate your financial resources and think in the long term, thus developing a strong saving and investing discipline. Term insurance is one of the products that act as a base or the first layer of your financial protection plan. It also makes you consider other areas such as savings, investments and even planning for your retirement.
- Tax benefits
In India, term insurance premiums qualify for tax deductions under Section 80C of the Income Tax Act. The premiums you pay can be deducted from your taxable income, reducing your overall tax liability. You can claim up to ₹1.5 lakh as deductions, which is a significant benefit for salaried individuals. Moreover, the payout from a term insurance policy is tax-free under Section 10(10D), providing additional tax savings for your family in case of a claim.
- Peace of mind
Life is unpredictable and knowing that your family will be financially secure even if you’re no longer around offering immense peace of mind. Term insurance ensures that your loved ones won’t have to face financial hardships due to your absence. This peace of mind allows you to focus on building your career, personal goals, and wealth, without worrying about what could happen in the future.
- Inflation protection
Life is uncertain and knowing that your family will be financially secure when you are no longer there to provide for them is very comforting. Term insurance guarantees that your family will not have difficulties in paying for their needs and wants because you are no longer around. It gives one a chance to concentrate on establishing a career, personal interests, and wealth accumulation without thinking of what might occur in the future.
Ending note
Purchasing term insurance at a young age not only saves money but also gives complete financial protection for your loved ones. With advantages such as more affordable premiums, tax savings, fast medical exams, and configurable plans, it’s a wise option that protects your family’s future. Using a term insurance calculator, you can estimate the coverage you require and the premiums you will pay, allowing you to make an informed decision. Finally, early preparation provides peace of mind, knowing that your family’s financial requirements are met regardless of what occurs.
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