Many people in their early to mid-20s hesitate to buy life insurance as they believe that they do not need insurance at this stage of life. They feel that they can defer this investment to a later date, when they get married or have additional responsibilities like kids or retired parents.
But the pandemic has shown us that life can be unpredictable, and uncertainty can strike at any time. Hence, investing in life insurance at an early age can be a life saviour as it offers financial security to your family in case of your unfortunate demise.
Investing in a life insurance plan at an early age offers many benefits. But there are certain factors that one must consider.
- Lower premiums, larger life cover
One of the main benefits of investing early in a life insurance plan is that you are likely to pay lower premiums as in general, one’s health is much better, and mortality tends to be lower in younger age-groups. Thus, by spending less on premium, you would have the option of saving more and investing the money in other avenues.
You are also likely to get a larger life cover if you purchase a plan at a younger age. You might get a life cover of 15-20 times your annual income if you invest in a plan in your 20s or 30s, as compared to about 5-10 times your yearly income if you purchase a plan in your 40s or 50s.
You will also benefit from the power of compounding by investing early. You will be able to earn a higher return on your investment, which will go a long way in helping you plan for the important milestones that will come up later in life.
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- Opt for a separate plan
While this may be the early start of your career, certain employers offer their employees coverage under a group term insurance plan. While this does provide a certain amount of financial protection, it is important to keep in mind that this financial security is valid only until you work with the same employer. When you switch your job, this coverage will no longer apply to you and your new employer may or may not have a group cover for their employees.
Also, if you decide to take an extended break between jobs or more importantly, if you decide to become an entrepreneur at a later stage in life, you may suddenly find yourself without a life cover. At that point, you may find it difficult to get a plan or it could end up being costly.
- Tax benefits
Investing in a life insurance plan may offer you tax benefits under Section 80C, Section 10(10D) and Section 80D of the Income Tax Act, 1961. It is advisable to consult a financial adviser who will provide you with the right guidance about the tax benefits applicable to you.
- Additional riders
To enhance the protection aspect of a base life insurance plan, one can opt for various riders, such as accident, disability, waiver of premium, or critical illness, depending on one’s needs. Riders help make the plans more potent and cover multiple aspects of risk that a customer could encounter. These riders are optional and come at an additional cost. However, when you are buying a life insurance plan at an early stage of life, the additional cost is likely to be nominal and the riders are easier to get.
To sum it up, there is clearly a lot to be gained by buying a life insurance plan early in life. So, invest in a life insurance plan today to meet your financial goals while staying financially protected.
This column has been written by Vighnesh Shahane, MD & CEO, Ageas Federal Life Insurance. Views expressed are personal
