How many of us really give life insurance a thought when we are just starting out in life and our careers i.e. in our 20s. Most of us deign life insurance as a part of financial planning in the later life. However, are we really sure about what surprises life is going to throw at us? Therefore, it is vastly recommended that one subscribes to a life insuring policy as soon as they can. Well, like LIC says, 'zindagi ke saath bhi aur zindagi ke baad bhi.' Other than the fact that an insurance policy provides for a protection blanket against curveballs of life, it has other financial benefits as well. Of course, it is not a panacea to all evils but as long as used properly and strategically, a life insurance policy can delete possible problems beyond death benefit.
Advantages of buying a life insurance policy in your 20s:1. Low Premiums: It is very difficult to procure a term life insurance in your 50s and 60s. And that can actually be termed as the cost of postponement. Your life insurance premiums are directly linked to your age and health. Therefore, like they say early bird gets the deal. For example, a 24-year old youth needs to pay about Rs 7,000 per year for a regular premium online term plan for 30 years term and Rs 1 croresum assured. If he opts for the same at the age of 30, he will need to pay about Rs 9,000, which is an extra Rs 7,20,000 compared to a 24 year old guy!
Insurance companies prefer younger and fitter subscribers to their life insurance policies. This implies that their subscribers have a lower risk of dying and therefore, payment before lapse of the term is also less probable.
2. Provides room for experimentation and evaluation: Being younger always provides the time for being flexible in your choices of subscription. There is no hurry or an urgent need. You can not only conduct a thorough result but you also have room for hit and miss policies - i. you have time on your side and ii. Policies are relatively cheaper and are available at better terms. It also avoids the possibility of being underinsured.
3. Longer time span for accumulation: Life insurances can be simply defined as a savings plan for the biggest contingent in one's life - death. It is always advisable that one should begin early. The earlier one begins the more you save, especially when one purchases a savings cum insurance policy. It gives one a larger accumulation period and the advantage of compounding and thus, a chance to save a large corpus.
4. Short term plans: Many short term plans like debt, mortgage, student loan etc. can also be covered by a well-planned insurance policy.
5. Greater financial burden in older age: As one grows old, their responsibilities increase and with that the financial burden also increases. It is a practical scenario that once a person is married and has kids, personal expenses are only going to rise - giving only so much space to save and purchase a hefty life insurance policy.
6. Tax Benefits: A Life Insurance purchaser is eligible for tax benefits under section 80C, 80CCC and 80D of the Income Tax Act, 1961 depending on certain conditions (only in the case of an individual and an HUF)
The notion that life insurance is only meant for those with a family and kids is absolutely false. Life Insurance has become an essential component of one's financial planning. Therefore, the sooner one starts the more benefits one reaps.
