As a young individual, you may often take it too easy when it comes to making major life decisions. But, this is the best time to think about major decisions related to your career, your life, and most importantly your money.
Life is uncertain and anything can happen at any time. Hence, it is better to be prepared for all possibilities. At a young age, one of the primary investments that is recommended is a term insurance policy. Want to learn why?Read further to understand more about a term insurance, its significance, and how beneficial it can be for you.
What Is Term Insurance?
A term insurance policy is a type of life coverage that covers your family in the case of your death. It offers a payout of the amount you set at the time of buying the policy as the sum assured to your family. More precisely, the payout is given to the nominee that you name in your policy. In most cases, this nominee is an immediate family member like a spouse. However, you can name other relatives as nominee as well.
Why You Should Get Term Insurance?
· Low premiums
At a young age, you should make the most out of your income. However, you do not want to spend on investment avenues that may end up setting you back instead of giving returns. Moreover, at a young age, you may not have the right knowledge or the right resources to make smart investments in the market. Hence, it is not wise to put a lot of your money into something that you do not understand. Instead, you can get a term insurance policy for the low premiums that it offers. This makes sure that you spend less money on a financial product that gives you great value.
· Buying early is economically sound
When you buy a term policy, your age is a big factor in how much the insurance provider decided to charge you for the policy. The coverage you get would be different across different ages. At an older age, you would get your term insurance coverage for a much higher premium. Additionally, the process of buying the policy will be more difficult for you.On the other hand, buyingit at a young age would mean an easier process due to better health (also, individuals with no medical history) and a much lower premium. Use a term plan premium calculator to see how much premium you would have to pay as you age.
· Low rejection rate
Pre-existing illness is any medical condition that you may have before buying the policy. Insurance providers have a strict policy of avoiding offering coverage for any kind of premium to individuals withmajor pre-existing illness. Hence, in most such cases, the application is rejected. However, at a young age, you are unlikely to have any major illnesses. Therefore, there is little to no chance of rejection due to no pre-existing illnesses in your youth.
· No dependence on corporate insurance
Most Indian companies offer health and life coverage to their employees as part of their employment benefits in addition to their salary. While you may be happy and relieved about having life coverage, reading the details within the policy would give you an insight into the exact quality of coverage. Most of the life coverage that companies offer is very generic. Moreover, it is subject to your employment at the company. On the other hand, you can buy a term insurance for low premium with a high coverage that you can depend on, regardless of your job.
· Tax benefits
Most traditional term insurance policies only have a death benefit that is offered as a sum assured that is given to yourfamily. However, newer policies by insurers offer various additional benefits. These are especially beneficial for younger buyers. These additional benefits include accidental death benefit, premium waiver, income supplement, etc. Premium paid towards insurance is deducted from your taxable income. Term insurance tax benefits include an annual deduction of up to Rs 1,50,000 as per the Section 80C of the Income Tax Act.
Ensure to keep in mind the tax benefits, medical history, financial appetite, in order to buy term insurance at a young age. Buying it early on in life results in various benefits, hence, avoid missing out on them.