Term insurance: why it’s a must-have for young professionals

Beginning a new career is a significant milestone not only in terms of finances but also in terms of responsibilities. This is the right time to pave the way to ensure financial security in the long run, both for yourself and your family.

Ensuring the financial security of your beloved family members from the very start will significantly lessen your burden and secure your safety through efficient planning.

Term insurance will help you go a long way in this aspect. Despite your absence, it has been crafted to take care of your family members by offering death benefits as per the plan terms.

What is term insurance?

Term insurance is the purest form of life insurance, a mutual agreement between the insurer and the insured, where the designated nominee or the beneficiary receives the death benefit if the policyholder-cum-insured passes away during the plan term.

Term plans involve no element of savings or investment. It allows no maturity benefit if you outlive the policy.

Importance of buying term insurance early

Purchasing a reliable term plan early in life will help you enjoy a secure financial future for your family in more ways than one:

1. Reduced chances of rejection

The procedure for purchasing a term plan early in life is significantly easier. While you are young, it is expected that you are healthier and less prone to health issues, making you an ideal candidate for buying this form of insurance, as the associated risks remain low. Such favourable conditions reduce the risks of rejections.

Apart from this, the insurance companies also charge comparatively lower premium rates for young buyers. The premium you need to pay for a term plan purchased in your 30s will increase if you purchase the same term insurance in your 40s, offering identical coverage, as the health risks increase with age.

2. Financial security

Term plans ensure that your beloved family members never face any financial hardships during your absence. The insurer offers a death benefit with life coverage in the case of any unfortunate event. This payout is either in the form of regular income or a lump sum payout.

An early purchase ensures that your loved ones remain protected even when you do not have the scope to maintain significant savings.

3. Tax saving

Term insurance investment allows annual tax benefits, which proves to be very beneficial for young professionals. You are eligible to claim a maximum tax deduction of up to INR 1.5 lakhs u/s 80C of the IT Act of 1961.

Apart from this, the death benefit qualifies for tax deduction u/s 10 (10D).

4. Longer coverage

Purchasing a term plan early allows young professionals to enjoy enhanced and longer coverage at comparatively lower premium payout rates than purchasing later. The earlier you buy, the lower your premium payable amount is. Moreover, this premium amount remains unaltered throughout the tenure.

However, if you keep waiting, the premium prices tend to rise with your age.

5. Financial planning and security

Although a young professional does not have to face or handle too many family responsibilities, however, the scenario soon changes due to family extension and planning. Marriage, children, ageing parents, all add up to increase the responsibilities manifold. An early purchased term plan matures enough to ensure financial protection to all the new additions.

If you purchase a term insurance at your 25th year, when you get married in your early or mid-30s, your plan is enough to suit the enhanced familial responsibilities at no extra cost.

6. Debt and liability coverage

Several young professionals tend to take various loans and debts like an education loan, a personal loan, a car loan, a home loan, etc. These loans become significant financial burdens for the dependent family members, especially during challenging circumstances. Term plans are crafted to cover such scenarios efficiently.

If you maintain an education loan of INR 10 lakhs and a home loan of INR 50 lakhs, your INR 1 Cr term plan will effectively manage these loan payouts.

7. Riders and add-ons

Insurance providers often offer several riders and add-on benefits to enhance the scope of the basic plan:

• Critical illness rider: This offers a lump sum payout on the diagnosis of any of the listed critical illnesses of the concerned individual as per the chosen plan terms.
• Accidental death benefit: This offers an additional coverage benefit in the case of accidental death.
• Premium waiver: Depending on the chosen plan terms, future premium payments get waived in the case of permanent disability of the insured individual.
• Return of premium: If you outlive the plan term, this will help you to get the refund of the total premium amount paid so far.

8. Peace of mind

Guaranteeing the financial security of your family offers to retain your peace of mind, allowing you to focus better on your future career goals, exploring better avenues and opportunities, ensuring better prospects and profits.

Wrapping up

Term insurance is beyond a simple financial product; it is regarded as a basic foundation for future financial security. Its high coverage, reasonability, and simplicity are the principal reasons for its popularity. Through early purchase, you ensure lower lock-in premiums, ensuring secured coverage for future liabilities, offering a safety net for your beloved family.