Term insurance plans are some of the most common and popular life insurance products that people purchase for their portfolios. Yet, despite the popularity, the perennial bone of contention remains- what is the right age to buy term insurance? The truth is that no matter what stage of life you are at, Term Insurance plans can serve a purpose in your financial portfolio and remain crucial to it.
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Read on for more information on how term insurance can benefit different age groups and other crucial aspects of these plans.
Why insurance is essential for your portfolio
Insurance is a basic necessity for every investment portfolio, considering the uncertainty of life itself. The policyholder will naturally want to provide their family with the same lifestyle and financial security upon their absence because of an unfortunate/sudden demise. This is where term insurance or other forms of life insurance come into the picture.
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What is term insurance?
Term Insurance is a sub-type of life insurance that offers financial safety to the policyholder’s family in the tragic event of their unfortunate demise during the policy tenure. These plans pay out a death benefit to the nominees of the insured individual in this case. They offer financial safety for the family for a specific duration or term. Premiums are usually more affordable for these plans than many other types of life insurance plans. You can utilize a term insurance calculator to calculate the payable premium amount.
Which is the right age to invest in a term insurance plan?
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As mentioned initially, there is no hard and fast rule in place that dictates the right age to invest in a term insurance plan. You can purchase them once you are 18 and upwards, usually until age 65. However, here are some core points that you should keep in mind for every age/life stage:
- Those in their 20s- This is the ideal time to purchase term insurance since it is highly affordable and ensures financial coverage for the family in case of any unfortunate mishap. The risks of death/disease are automatically lower when one is young, which explains the possibility of obtaining higher coverage at a lower premium.
- Those in their 30s- These are times when people have more financial responsibilities and loans to pay off. However, suppose you have not got a term insurance plan yet. In that case, you should take it immediately to ensure the same financial coverage and future lifestyle for your family in your absence.
- Those in their 40s- This is when people have the maximum responsibilities. Term insurance plans should be a must if not purchased until now because they will offer financial coverage for children in the absence of their parents while helping them meet future educational and other costs.
- Those in their 50s – People should not put off buying term insurance, if they have still not got one yet. This is vital for safeguarding their children’s financial and educational future and covering any liabilities that may remain, like loans or mortgages. However, the premiums will be pretty high. You can also add riders if you can afford it.
People should not wait until they are in their 60s to purchase term insurance. Hence, it can be said that the 20s and 30s are the best time to buy term insurance. Premiums are lower, and it will safeguard the family financially. The best part is that you can also get tax benefits on your investment.
Why should you invest in term insurance?
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You should consider investments in term insurance for several reasons. Some of them include the following:
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- Life cover for the policyholder, insuring the family financially after their demise
- Add-ons like accidental death, accidental disability benefits, critical illness coverage, and others. Accidental death coverage is a payout of a benefit upon the insured person’s death in case of an accident. Critical illness coverage offers financial protection against critical and potentially fatal ailments. In contrast, accidental disability benefits offer a payment of a promised sum to cover loss of income and financial needs in case of any permanent/temporary disability arising from an accident.
- For your term insurance investments, you can get tax benefits under Section 80C of the Income Tax Act, 1961. This section enables benefits up to Rs. 1,50,000, and hence you can claim your premium payment as a deduction while filing your taxes. Moreover, the death benefits, or the benefits listed under any riders purchased with the plan, are tax-free under section 10D of the Income-tax Act, 1961.
- Some policies may provide a waiver of premium in case of financial emergencies or other issues, provided you take it as a rider. This means that the policy may continue even in case of missing premium payments due to loss of income or other reasons keeping the coverage intact.
- Some term plans may even have maturity benefits (return of premiums) for policyholders
Conclusion
You must purchase term insurance coverage to live a stress-free and financially secure life. However, you should examine a few things before finalizing a term plan. The insurance coverage should be based on the insured’s annual income and financial objectives. Many people choose inadequate coverage, which can later result in financial stress for the family. Additionally, some people opt for a brief coverage term to pay less in premiums. However, if the policy term is short, you must purchase new policies after the policy period concludes. You might not receive the same premiums from a new term insurance plan and spend more.
Additionally, if you neglect to reveal information regarding current medical conditions or smoking habits while purchasing the plan, your family could lose out on the sum assured. As a result, the purpose of buying a term plan would be defeated. Simply put, do your homework, comprehend the terms and circumstances, and purchase term insurance when you are young.
