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  • Why the 20s are not too early to invest in a term plan

    Published on February 5, 2020

    A term insurance product can be an essential part of your life. However, many of you might not plan on buying term life insurance at a young age. Since your primary goal might be your career when you are young, you might avoid the purchase of term life insurance policies. Buying a term policy can be your least priority at a young age when you have started out your career.

    While you might think purchasing term plans can be of least importance at a young age, it can play a crucial part in your financial planning procedure. A term insurance plan is a sub-subject of life insurance that can protect you financially from the eventualities of life. Although the benefits can be the same even at the later phase of your life, you might receive relatively high benefits if you purchase a term plan when you are young.

    Before you understand the benefits of purchasing a term plan at a young age, let’s first decode term insurance meaning in detail:

    Term insurance can be a pure protection plan, which can combine death benefits as well as survival benefits under a single integrated plan. As a policyholder, you can secure your loved ones financially in your absence. If you survive the term policy, your insurer can return the whole premium amount that you paid throughout the year on the maturity date.

    Under term insurance, you can receive high coverage at an affordable rate. However, the available costs of term policy can depend on your age. Since your age can impact the term policy, let’s understand why the 20s are not too early to buy term insurance:

    1. Low premium

    Term insurance plans are an affordable form of insurance. If you purchase a term plan at a young age, your insurer can charge with a relatively low premium than usual. The primary reason for lesser premiums at a young age can be your physically fit health condition. When you are young, the chances of contracting life-threatening illnesses such as kidney failure, cardiovascular diseases, and so on can be less. Since you might be physically fit at a young age, your insurance company can charge you with a low premium.

    When you grow old, you might suffer from such illnesses that can result in death. Since the chances of being prone to life-threatening diseases can be more, your insurer can charge a relatively high premium. Therefore, buy term insurance when you are young if you are looking forward to purchasing an affordable insurance product. In simple terms, the fitter you are, the lower your premium.

    1. Financial security

    The primary idea behind the introduction of term plans is the financial security of your loved ones. Therefore, it provides death benefits solely for the financial protection of your family in the long run. Due to the provision of only death benefits, many of you might have opted out of the purchase of term plans. As a policyholder, you might have felt that paying for an incomplete term plan without survival benefits can be expensive.

    Since many of you might have felt that you require a complete term policy, many insurance companies have availed smart term plans with survival benefits. A smart plan can look after your financial goals as well as your family’s needs. It can be comprehensive coverage that can provide you with new-age features to match your evolving needs.

    1. Tax benefits

    When you start earning, you should regularly pay taxes. As a young adult, you might look for tax-saving options that can help you reduce your tax liability. The term life insurance plans can be the right choice that can act as a tax-saving solution for you at a young age.

    Typically, a term plan can provide tax benefits in accordance with Section 80C and Section 10(10D) of the Income Tax Act, 1961. Under a term plan, you can be eligible to claim deductions on the following:

    • Premiums

    As stated under Section 80C, you can claim a deduction up to Rs. 1, 50,000 on your taxable income.

    • Maturity proceeds

    The amount received on the maturity date can be tax-free under Section 10(10D).

    To conclude, a term plan is a productive insurance option. Moreover, its affordability and flexibility can make a term plan the right match for the youth. Purchasing a term plan at a young age can allow you to stay prepared financially on the occurrence of any unfortunate event. Before you buy term plan, you should take professional help to ensure that you end up with the right type of plan based on your financial requirements at a young age.

     

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