Authored by Harish Kurudi
From the first appointment letter or perhaps right from you stepping out of college, your parents often would have told you the importance of saving money and creating backup for emergencies. They are often right; the personal goals and liabilities often vie a piece from that monthly salary.
Whichever way you try, there could be few spendthrift moments - parties, phone upgrades and not to ignore the credit card payments, education loans & even big goals such as a foreign trip or buying a house at an early age such as yours.
Therefore, it is important to strike a healthy balance between enjoying the joys of life and being a finance-responsible person. The key to this is a good financial planning habit which if adopted early on ensures a secure and strong financial future. Insurance can play a vital role in doing that early in your age.
All you need to start is with a term insurance plan.
Let us look 7 reasons to buy term insurance at an early age Aligned Finances
Just like the best time to prepare for the exam is when there’s enough time and not the day before the exam, planning finances right from your first salary will prove beneficial all through your working life. Insurance helps you to safeguard against unforeseen circumstances and gives you peace of mind and acts as a tool for disciplined financial planning.
Lock in Great Rates
This is one of the most significant benefits of buying insurance at an early age as premium rates are directly proportional to age. Also, good health and being less prone to chronic diseases equate to lower premiums, but age is the key to that too. Term insurance is the best option to start with – simple, easy to understand and buy.
The premiums tend to be expensive as compared to what a person pays when s/he is in the mid to late 40s when typically, people get very serious about insurance. So, lock them when they are cheap!
Large Covers At Lower Premiums
With an increase in age, your premium amount will also increase. Typically, one needs to cover for at least 20 times the annual income. Purchasing such a large cover is possible with the term category. So, buying financial peace of mind for your family isn’t that difficult.
Life insurers pay utmost attention to one’s medical history when underwriting a policy. Buying insurance plans later in life or on the onset of diseases or liabilities often lead to haywire finances. For young adults, health is good and chronic age bound diseases may be away for many years to come, hence, there is a high possibility of a policy being issued without many hassles and simplified processes online.
Insurance plans can be used as collaterals at the time of purchasing loans such as a home, car, etc., While the sum assured is used to pay off any outstanding liabilities, creditors may be comfortable in issuing higher loans for those with term insurance since the risk of loan non-payment is mitigated to an extent.
Avail Tax Benefits
There is one more saving which adds up in a big way to your financial planning goals. Life insurance offers significant tax deductions and exemptions. Under Section 80C of the Income Tax Act, one can claim a deduction of up to Rs 1.5 lakh on the premiums paid. Even the benefits one gets at the maturity of the term or death are tax-free.
Health and habits play an important part in deciding the premium of a policy. For e.g., If you are a smoker and are in the process of quitting the habit identify insurance policies that offer discounts for quitting smoking.
There are similar new and unique wellness benefits and compelling features which often encourage you to maintain a healthy lifestyle and discounts which are offered by very few insurance companies and hence it makes a lot more sense to compare & choose your policy wisely.
Lastly, your family is one of the most important parts of your life. All the effort and wealth built over time is for the family to have a good lifestyle and have a stable future. By the time you turn 40, you may have many responsibilities on your shoulders, apart from fulfilling the needs of your family. Special attention must be given for your child’s higher education and you may also have your retired parents to take care of. So, the best time is to start young, start today!
Harish Kurudi is Vice President and Head- Products and marketing, Aegon Life Insurance. Views are personal