As the name suggests, a term life insurance policy provides coverage against the uncertainties of life for a specific ‘term’ or duration. And, while it continues to remain the most popular type of life insurance policy, many modern youngsters are apprehensive about buying a term plan since it does not offer any maturity benefit, nor does it have an investment or savings component.
Many youngsters and working couples believe that they need not buy a term plan since they are financially independent. However, is this the right approach? Many financial experts and insurance gurus suggest that term insurance is a must-have for all, irrespective of age and income status.
When buying a term insurance policy, you must know its basic purpose. The fundamental reason why many people buy a term plan is to secure the financial future of their family members. The policy pays a death benefit to your family if something unexpected happens to you.
As a youngster, you must consider this a great boon for your financial planning. It would help if you looked at buying a term plan as the first step towards a robust financial plan for your future. The term insurance policy must be commensurate with your age and income. This will go a long way in helping you accomplish your long-term goals without being derailed by the uncertainties that may occur at any time.
Also, it is possible that after a certain age, when your parents retire or have no steady income, they may become financially dependent on you. Keeping this in mind, it is best advised to buy term insurance when you are young. Additionally, many youngsters and married couples tend to put off buying a term plan until they achieve a milestone like becoming a parent, marriage, or their child’s first birthday. However, they don’t realise that with age, the premium for the term plan keeps increasing.
Hence it is advisable to purchase a plan when you are young. The sooner, the better. In fact, many insurance advisors suggest that you must buy a term plan right from the day when you draw your first salary.
Another critical factor about purchasing a term plan at a young age is that you must reassess your insurance needs every few years as you grow in your career and progress to different life stages. This essentially means that you must relook at your coverage amount and increase the same as needed.
For example, when you are young and unmarried, you may have purchased a term plan for maybe 5-10 years with a sum assured of Rs. 5 lakhs. However, when you get married and have children eventually, you will have an additional responsibility of protecting your spouse and child. In this situation, a Rs. 5 lakh insurance cover may be insufficient to cover your family’s needs, and you may want to increase the cover-up to 20 lakhs or more
Also, even if both you and your partner are working, in the purview of the rising inflation, if something happens to either of you, one parent’s income may not be enough to meet the necessary expenses like child education, marriage, etc. Keeping this in mind, you and your partner must get a term insurance cover to secure your financial future.
Apart from securing your family’s future and giving you peace of mind knowing that your family will never face financial hassles, a term plan also serves as an excellent tax-saving instrument. So, when you are young, you may want to save a maximum amount on your tax payment. Having a term plan can help you get tax benefits up to Rs. 1.5 lakhs in a financial year. The premiums you pay are eligible for tax deduction under Section 80C of the Indian Income Tax Act.
Thus, with so many benefits of term insurance, there is no reason why working couples and youngsters should not buy a robust term plan.
