Why You Should Have a life insurance policy in Your early 20s
Today, even as people are realising the importance of buying a life insurance policy, they tend to avoid buying until they are in their late 30s or early 40s. Experts suggest that it is a wrong approach and stress on buying a policy in the early 20s. Read on to know why?
In India, most youngsters who are in their early 20s don’t even think of buying a life insurance policy. This is because the modern generation believes in the ‘you only live once’ policy and tend to spend lavishly on their lifestyle purchase rather than saving for the future. Also, there is a common notion among the youngsters that you don’t need insurance when you are young and healthy.
Contrary to popular belief, many experts recommend buying a life insurance policy at an early age. It is not only important but also offers several benefits. Let us understand why you must purchase a life insurance policy in the early 20s.
Premium is affordable
The premium amount is one of the most important factors people consider while buying a life insurance policy. When you buy a policy at a young age, you can get a policy with a higher sum insured at a much affordable premium than when you buy the same policy in your 30s. The insurers understand that you have a longer life expectancy as youngsters, which means a lesser probability of paying out.
Let us assume you want to purchase a life insurance policy of Rs. 1 crore that provides coverage until you reach 75 years. The annual premium for the policy is likely to be around Rs. 6000, if you purchase the policy at the age of 25. But, the premium will increase to Rs. 10,000 if you purchase at 30.
Once you buy a term life insurance policy, the premium amount remains fixed for the entire policy period. Hence, when you buy early, you get the coverage at an affordable price and save a significant amount in the long-run.
For example, for a term life cover of Rs. 1 crore till 75 years, as a 25-year-old, you may have to pay a premium of Rs. 8000 every year, which means over the next 50 years, you would pay Rs. 4 lakhs. But, if you purchase the same policy at 35, your total premium payout will be close to Rs. 6 lakhs. Thus, when you buy a life insurance policy, you save more money.
Your dependants get covered early
Waiting to get a life insurance policy for too long means you are leaving your family vulnerable. In the event of your unfortunate demise, they may have to face financial hardship due to income loss. Even if you are not married, your parents may have to manage your liabilities (if any). This might put them under immense financial pressure.
Thus, to avoid this situation, it is better to purchase a life term plan at a young age so that your family members get much-needed financial protection against uncertain events like death. It will give you peace of mind knowing that they will not face financial hardship even in your absence.
Tax is an unavoidable expense. But, you can certainly reduce your tax liability by purchasing a life insurance policy. Life insurance allows you to get tax benefits on the premium paid under Section 80C of the IT Act. Also, the payout that the family may receive in the event of your untimely demise is exempted from tax under Section 10(10D).
A term life insurance policy is a must-have in your financial portfolio, so why not buy when you are in your early 20s and get coverage earlier at a lower price.