Term insurance

4 Reasons Why Buying Term Insurance Early Is A Smart Choice

In our early or mid 20s, getting term life insurance is the last thing in our mind. The common belief is – being young and healthy, we do not need term insurance; Or since responsibilities are less, we do not need insurance etc. Now, contrary to the popular belief, buying term life insurance early is not only important but also beneficial. 

In this blog, we will talk about the 4 reasons why you should buy a term life insurance early in life. 

And, here are the 4 reasons why you should buy term life insurance early

#Reason 1: Premium amounts for term insurance policy is low

This is the biggest advantage of buying term life insurance early. As you grow older the premium amount for term life insurance policies increase significantly. 

Let’s suppose, you want to buy a Rs 1 crore term life insurance plan, that provides you coverage till 75. If the yearly premium amount you are likely to pay is a little more than Rs 6,000 at 25, you pay around Rs 10,000 at 30. And at 45, you will have to shell out Rs 30,000 as the yearly premium for the same coverage amount. 

Term Insurance Yearly Premium at Different Life Stages
Coverage AmountAgeYearly Premium
₹1 crore25₹8,000
₹1 crore30₹10,000
₹1 crore35₹15,000
₹1 crore40₹20,000
₹1 crore45₹30,000

At a younger age you are healthy and have less responsibilities, insurance companies consider these factors while deciding term life insurance premium. 

#Reason 2: As premium amount is locked for life, you pay much less in total

Once you buy a term policy, the premium amount is locked for lifetime, i.e. it remains the same throughout the policy tenure. Hence, buying it early means saving a big amount of money over a period of time. 

For example, for a term life insurance cover of Rs 1 crore till 75, a 25-year-old needs to pay an yearly premium of Rs 8,000. That is, he/she has to shell out Rs 4 lakh in the next 50 years. Meanwhile, for the same policy, a 35-year-old pays Rs 15,000 per year, i.e. Rs 6 lakh over the years in total. 

Total Premium Amount Paid For Buying Term Insurance At Different Life Stages
Age at which the plan was bought2535
Coverage amount₹1 crore₹1 crore
Coverage till the age of7575
Yearly premium amount₹8,000₹15,000
Total premium amount₹4 lakh₹6 lakh

So, you have to shell out Rs 2 lakh extra for the same policy for buying it at 35 and not 25. 

So, buying early means saving more money. 

#Reason 3: Your family and dependents get covered earlier on. 

Waiting too long to get  term insurance means you are leaving your family vulnerable that if you die early then they would have to face financial hardship. Even if you are not married, if your parents are dependent on you how will they manage their expenses? Plus if you have any loan – automobile loan, student loan or even credit card debt – your family members will have to pay for it. This might put them under more financial pressure. 

Buying a term life insurance early on means you do not have to worry about it anymore. 

#Reason 4: Enjoy the tax benefit from the initial stage of your career. 

The primary reason for buying term insurance is to ensure that your family does not have to go through financial trouble if you are not there. But you also enjoy tax benefits for buying a term plan. 

And, here are the 3 tax benefits you enjoy from term plan: 

Section 80C: Under this section, you can claim tax deduction for the premium amount that you pay for the policy. Section 80C is the biggest tax deduction pool and under this section, you can claim a deduction up to Rs 1.5 for certain investments and purchases.

Section 80D: This exemption is allowed on the premium paid towards health-related coverage like critical illness riders. You can claim deductions up to Rs 25,000 for the premium paid towards it.

Section 10 (10D):The nominee can claim this tax benefit while claiming sum assured in case of the death of the policyholder. The entire amount is completely exempt from taxes.

Bottom Line: 

Term life insurance is an essential financial product that you have to buy at some point – sooner or later. But, if buying term life insurance early on translates to benefits like paying less, enjoying tax benefits from the early stage of your career, cover for your family earlier etc, why miss out on them. 

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