When you are young and start earning, having life insurance might be the last thing on your mind, since most people do not have any liabilities or dependents when they are young. This enables them to live a carefree life. However, as you grow and start shouldering responsibilities over the years, your way of managing finances also evolves with it. If you make some of these financial decisions at a young age, you will benefit from them in the long haul easily. One of the first decisions to make would have life insurance that protects you and your loved ones.
It may seem overwhelming to lock funds unnecessarily by buying life insurance at a young age. This is because most young individuals do not earn enough money to pay the hefty premiums traditional insurance plans require. Instead, most young individuals find it more practical to buy term insurance. The meaning of a term plan is that a person can avail a life cover for a specific tenure. Here are 5 reasons young individuals prefer buying one:
- Offers room for fulfilling other financial goals
Term insurance is known for providing huge comprehensive coverage for low premiums. Since the premiums are low, the money that remains can be used for fulfilling your expenses or invested in instruments you want to. This is because, along with having a term plan that safeguards your family in your absence, it is also important to have investments that help towards achieving your long-term goals. Also, over the years, your earnings increase as your salary or income will grow, but the term insurance premium remains the same. It leaves further space to utilize your money in different instruments and expenses, allowing you more financial freedom.
- Low premiums
With any type of life insurance, including term insurance, age is a major factor that is taken into consideration while calculating the premium. Low premiums are one of the significant term insurance benefits you get when you buy them at a young age. This is because usually young individuals do not have any underlying health condition and their life expectancy is also significantly longer than older individuals. Locking term insurance at a low premium ensures you can pay it easier for the entire duration of your policy. Even though young individuals may not be shouldering any responsibilities now, things change when they have a family. It allows them to focus on their other financial responsibilities while having a secure financial backup for their loved ones.
- A longer period of coverage
Buying term insurance at a young age allows you to buy a longer coverage period at a significantly low premium. It allows you to opt for a higher tenure where, over the years, the premiums that you would have to pay would seem nominal, meaning, with a term plan, the higher the tenure, the better. Having a life cover for a long tenure ensures that your loved ones are secure over the years.
- Tax benefits
There are several term insurance benefits one can enjoy when it comes to taxes. The premiums that you pay for your term plan are exempt from taxes under Section 80C of the Income Tax Act. In case of your unfortunate demise during the duration of your policy, the sum assured that your nominee will receive is free from any taxes under Section 10 (10D) of the Income Tax Act. When you are filing your taxes, the exemptions that you can choose through term insurance will come in extremely handy.
- Increase life cover at a low cost
When you buy a term plan at a young age, you may not have any dependents or liabilities. However, over the years, when you have a family or take some debt to achieve your goals, the current term insurance cover may not suffice. In such a scenario, you can increase the life cover during the tenure of your policy anytime you want. Buying a term plan at a low age usually allows you to add insurance coverage at a lower cost. You can also add riders that provide additional benefits with your existing plan for additional costs.