Secure your family’s financial future early. Though life insurance may seem unnecessary when you’re young and healthy, there are actually quite a few benefits to getting coverage in your 20s and 30s. Not only premiums are cheaper, but also easier to qualify for coverage when young and healthy. In the section below, we’ll discuss the reasons to buy life insurance in early age.
An Overview of Life Insurance
Life insurance is a contract between an insurance company and a policyholder. The policyholder pays premiums (regular payments) to the insurance company. In return, the insurance company provides a lump sum payment, known as a death benefit, to the designated beneficiaries if the policyholder dies during the policy term.
When applying for life insurance, the insurance company will assess your health, family medical history, occupation, hobbies, and other risk factors via a medical exam to decide whether to approve you and what premium rate to set based on the level of risk.
Types of Life Insurance Plans
Mentioned below are the different types of Life Insurance Plans:
- Term Insurance Plans: These plans provide life cover for a specified term like 10, 20 or 30 years. They are the most affordable life insurance as you only pay for the life cover. If you pass away during the term, your nominee gets the sum. If you survive the term, the policy expires without financial value.
- Whole Life Insurance Plans: Unlike term plans, these plans offer lifelong coverage. The premiums are higher as the policy pays out death benefits whenever you pass away, even if you live till age 100! It also builds up cash value that you can borrow against.
- Endowment Insurance Plans: These plans offer both insurance and investment. Part of your premium goes towards securing life coverage for the term, and the rest is invested. If you pass away within the term, the sum assured is paid. If you survive, you get the maturity benefit – the invested portion plus bonuses.
- Pension/Retirement Plans: This is meant for retirement planning; part of your premium goes towards securing life cover, and the rest builds your retirement corpus. You need to pay premiums for a set term to accumulate wealth.
- Unit-linked Insurance Plans: Unit-linked Insurance Plans (ULIPs) are a type of life insurance plan that provides insurance coverage and investment options. The premiums paid go towards an investment fund of your choice and provide life coverage.
- Term Plan with Return of Premium: TROP term plans have the additional feature that you get all the premiums you paid back if you survive the policy term. For example, if you pay premiums of Rs. 1 lakh annually for 30 years, that’s Rs. 30 lakhs. If nothing happens in the 30 years and you survive, you receive the premium amount back. However, the amount returned can vary based on the specific plan, and any applicable deductions or charges.
- Child Insurance Plans: These plans provide a savings and protection element for a child’s future needs. You pay regular premiums for a set term and get a lump sum at the end for the child’s education/marriage needs. If something unfortunate happens to the parent who buys the policy, the child gets the full sum insured immediately to take care of future financial needs.
Benefits of Buying Life Insurance in Early Age
Mentioned below are the benefits of buying life insurance at an early stage in your life:
- Lower premiums: The younger and healthier you are, the less premiums you’ll pay in life insurance. Premiums are based on age, health status, and life expectancy. When you’re young, insurance companies see you as a lower risk.
- Ability to qualify for coverage: If you have any existing health conditions, it may be difficult to qualify for life insurance later on. Applying when you’re young and healthy makes it much easier to get approved.
- Lock in insurability: Even if you’re healthy now, you may develop health conditions that make you ineligible for coverage as you age. Getting a policy early means the insurance company can’t drop you later or increase rates if your health declines.
- Provide for future life stages: When you’re young, you may not have a spouse or kids, but you likely will someday. Getting life insurance early means you’ll have coverage as your family and financial obligations grow.
- Building cash value: Some policies, like whole life insurance build cash value you can borrow against one day. Starting early allows more time for that cash value to grow.
The Bottom Line
Getting life insurance at a young age makes good financial sense all around. Not only are premiums significantly lower when you’re young and healthy, but it’s also easier to qualify for coverage before any health conditions develop. Starting a policy early locks in your insurability for the long haul. Most importantly, having coverage provides crucial financial protection for your family as you progress through major life stages and take on more obligations.
