What is the Right Age to Buy Term Insurance Plan?
It is necessary to create enough wealth to secure your family’s future, especially in your absence. There are various types of insurance that you can opt for to safeguard their interests. One of them is a term insurance plan, specifically designed to protect the people financially dependent on you in case of your untimely demise. A term plan works on the simple principle where you pay the premium and get covered for a predetermined period.
What is a Term Plan?
A popular insurance product, a term plan is a pure death benefit policy that gives life cover to the insured against his/her premature death. The nominee gets the corpus in a lump-sum payout.
It is important to note that a term plan does not come with a maturity benefit, which means that the sum assured will be paid to the nominee only. If the insured outlives the plan tenure, there will be no payout. However, it acts as a safety net for your loved ones who can manage their living expenses in the unfortunate event of your death.
Term insurance is one of the few insurance policies in India that come with a large sum assured of Rs. 1 crore or more, which varies depending on the insurance company, plan features, age, income, etc.
Term insurance is quite affordable in terms of premium payments. You get a good sum assured even after paying a conservative premium, making the term plan an affordable insurance option.
How are Premiums Decided?
Here are some factors that affect your term insurance premiums:
Age: The younger you are, the lower the premium you pay.
Gender: Based on a few studies that show a lower death rate in women, some companies offer discounted premiums to women.
Sum Assured: Like any other insurance product, the higher the sum assured, the higher the premium amount.
Lifestyle: The lifestyle choices of the insured also have a bearing on the amount of premium paid. An insurance company will charge more premium from a smoker than a non-smoker.
Term: Term is an important factor that affects your premium. Longer durations will require higher premium payouts. Most insurance companies issue term policies for a duration of 5 to 40 years or till the insured reaches the age of 99.
When Should I Buy a Term Plan?
The straight answer to this question is as soon as you start working. There are multiple reasons for this.
Anyone between the ages of 18 to 65 can opt for term insurance. However, your 20s is a good time to get into the insurance market and plan for your family’s future.
Since most people land their first jobs in their 20s and start earning a basic amount, they have relatively lower incomes and quite a few expenses. With dependent family members to handle at this juncture, a term plan offers an affordable solution in case of the insured’s sudden death. As the product comes with a high sum assured amount with low premiums, term insurance is a good option right at the start of your career.
The first preference of insurance providers is young and healthy applicants when it comes to providing insurance. People starting their careers have a stable income and are healthy overall tend to enjoy lower premiums than their older counterparts.
It makes sense to opt for online term insurance, which means you will be buying directly from the insurance provider. This leads to savings in processing costs and broker commission, the benefit of which is ultimately passed on to you in the form of lower premiums.
Benefits of Term Plan:
The premiums paid under a term plan are exempted under section 80(C) of the Income Tax* Act up to ₹ 1.5 lakhs. Another tax benefit of the term insurance policy is the death benefit received by the nominee, which is also tax-exempt under section 10(10) D, only if the annual premium is less than 10% of the total sum assured.
Term policies can be assigned towards other bank loans you take. In the case of your demise, the lender will simply get the outstanding loan amount from the death benefit, and the remaining amount will be passed on to your nominee. This can be of great help to your loved ones in the repayment of loans even after you are gone.
Since the basic premise of a term policy is to secure your family’s regular income in your absence, you can live a stress-free life knowing that there are enough resources for them to live a good life. With various critical illnesses grappling even the young generation, it is imperative to think practically and plan.
A term insurance policy provides long-term benefits to the insured and their loved ones at a very affordable cost. Everybody from young professionals and newly married couples to even working parents should opt for a term plan.
You can opt for Tata AIA term insurance, which allows online premium payments. This product helps you plan your family’s future financial health better.