Is there a good time to secure the financial interests of your dependents? “As soon as possible” is probably the correct answer to this question. Life has never seemed more unpredictable in these times of a pandemic, when adequate life insurance coverage has become an irrefutable necessity.
Today, many buy traditional life insurance products such as an endowment plan not only to secure the financial future of their dependents, but also to take advantage of the survival benefits of the policy. However, despite the advantages, these plans can also provide insufficient life coverage while offering lower returns than other investment vehicles.
As such, it might be better to separate investments and insurance and instead buy a simple insurance product like a term plan. This could ensure that you are able to get the life coverage you want (which should ideally be at least 10 times your current annual income) at an affordable cost. Here are some reasons why you should consider buying a term plan at an early age.
To save in the premium obligation
The premiums for a term insurance plan generally remain the same throughout the life of the policy. However, the amount of the premium is determined based on several factors, including the age at which the policy is purchased. The premium amount for the same sum insured will be much higher if you buy it at a later stage of life.
While a 25 year old individual would need to pay just 8,855 per year for a Rs 1 crore term plan with a term of 35 years, the same policy would cost Rs 16,423 per year for a 35 year old individual. and Rs 35,925 for a 45 year old. The cost of the premium would double if the purchase of the policy is delayed for 10 years and quadruple if it is purchased after 20 years.
The difference in premiums for increasing the term of the policy from 10 years (i.e. from 25 years to 35 years) would be only Rs 1,573 for a 25 year policyholder. But this same difference would increase to Rs 3,768 for a 35 year old individual and Rs 8,792 for a 45 year old individual. As such, buying a term plan at a young age allows you to get the coverage you want at an affordable cost, especially if you want to continue the policy for a long time, which you ideally should.
To secure future financial dependents
A delay in purchasing a life insurance policy could put your family members at enormous financial risk, especially if you are the sole breadwinner. Also, as stated above, it will cost you a lot more if you buy a life plan at a later stage. As such, you can have peace of mind by purchasing the relatively cheaper term plans at a young age.
To minimize the risk of rejection of the policy
We become susceptible to new medical conditions or illnesses as we age. Insurance risk could increase if you delay purchasing life insurance and develop health problems in the meantime – things that could increase the cost of the premium or lead to policy rejection (depending on of your state). To avoid all of this, it is best to start your insurance trip at a young age when the chances of developing any medical conditions are generally lower and the cost of the premium is also very low.
To save tax
Premiums paid for life insurance policies are eligible for a tax deduction of up to 1.5 lakh under Section 80C of the Information Technology Act. As such, term plans provide a great tax-saving opportunity for young people who often struggle to maximize the tax benefits available to them.
Building a solid financial foundation
It is always wiser to have adequate insurance protection before starting an expensive long-term loan like a home loan so that dependents are not left behind in case the borrower dies during the term of the loan. ready.
On many occasions, term life insurance coverage could also serve as collateral for large loans. Additionally, if you are able to secure a term life plan for a large sum insured at affordable premiums, you will end up with more money to meet other critical financial goals like building up a fund. ” adequate emergency through regular savings allowance or increase
payment fund for the purchase of a house or a car through smart and consistent investments. Buying a temporary life plan at a young age establishes a solid financial foundation that doesn’t just help you meet your life goals by
time but also by effectively protecting against uncertainties.
The author is CEO of BankBazaar.com