Insurance

Have a steady income to invest in a suitable plan? Term insurance is your best solution – affordable, low risk, and with the highest gains.

5 Reasons Why Buying A Term Insurance Plan At A Young Age Is A Great Idea
Thursday, February 25, 2021 - 11:52

Young, upwardly mobile Indian with a keen eye on the markets and a desire to create wealth for your family – does this describe you? If it does, you’re reading the right article – it discusses a low-cost option for you to plug your money and create unbeatable security for your loved ones in your absence. We’re referring to term insurance plans. Let’s find out why they are the most suitable saving plans for you.

Term plan: What it is, what it does

* What it is: A term insurance or term plan is a life insurance policy that offers a payout upon the demise of the insurer. The payout is transferred to the policy nominee, i.e. a family member such as parent, spouse, sibling or child. In India, you cannot appoint a friend or a person outside the family as the nominee. 

* What it does: The term insurance plan has some of the lowest premiums across all insurance products in India. However, this does not mean that the corresponding payout or coverage amount is low – on the contrary, the coverage amount may exceed Rs 1 crore or more, for premium payments as low as Rs 5,000. This means that you can insure your family’s future security for a low amount of money, thus using the policy as a low-cost saving plan. The money can fund a variety of initiatives, from running the household to paying for a child’s education or wedding.

Get on board: 5 reasons to buy term insurance when you’re young

At a time when there are myriad insurance plans that offer maturity benefits (which term policies do not) and even periodic income during the plan tenure, why should you choose term insurance? Consider the 5 most important reasons for doing so:

#1 It costs next to nothing over the spread of a year: At your age, you are keen to maximise your income, but you are understandably reluctant to invest in fluctuating markets. You might not even have the necessary wherewithal to understand how the markets work, or which investment options are suitable for you. Instead of getting into these nitty-gritties and potentially overspending your income, you can safely park a measure of your income in a term policy. The premium sets you back by just a few thousand Rupees every year, which are easily supplanted by your monthly paycheque.

#2 It costs less when you buy it early: A big advantage of buying a term insurance at a young age is that insurers will offer you a lower premium than if you were to purchase the same plan at age 30 or 40. This does not take away from the sum assured of the plan – for a lower premium than older age groups, you still get the same coverage amount and other benefits ingrained in the plan.

#3 You might not get rejected for pre-existing medical conditions: Insurers in India are clear about not offering coverage, or deducting a higher premium, from those clients that have pre-existing illnesses while booking the policy. As a person in your 20s with (assumedly) next to no serious health complications, the chances of your term policy application being rejected on health grounds are virtually nil.

#4 You don’t need to depend on your company-sponsored insurance: Most Indian companies offer life and health insurance to employees as an added incentive in their salary package. But examine the fine print of the insurance being offered, and you will discover that your insurance is lumped under a generic ‘group plan’ – it costs the employer less towards premium payments while offering you virtually no benefits in terms of coverage amount. You may certainly avail of the employer-sponsored insurance plan, but why not safeguard your family’s interests with a suitable term plan of your own? 

#5 You get a range of benefits with term policy: Most traditional term insurance plans only have the ‘death benefit’, i.e. a sum assured paid on the demise of the policy holder. But newer term policies from reputed insurers offer younger age groups other add-ons/riders like accidental death benefit, premium waiver, income supplement in case you lose your job, etc. The biggest benefit is that term plans offer a yearly tax saving under Sec 80C of the IT Act, which offers premium payment exemption up to Rs 1,50,000 per year.

Whether you buy it now or later, you will soon come to realise that buying a term plan is one of the most essential investments you can make for your family and yourself. Wouldn’t it be better to buy it now when the benefits are manifold, than wait for later and pay higher premiums?