Written by Santosh Agarwal
Abshiek Sanghavi, 29, is a Delhi resident working with a prestigious IT company as a Software Developer. Abshiek – just like most others during this age – is in the best of his health. He works hard, enjoys his life to the fullest and spends money on things he loves doing the most. However, buying a term life insurance policy to financially secure the life of his dependents is probably the last thing on his mind. Well, Abshiek is not the only one who give least priority to term life insurance at this young age.
Unfortunately, there are plenty of working professionals just like Abshiek in India, who live with this false notion that term life insurance must only be bought after a certain age – mostly when you are flooded with responsibilities like dependent parents, wife, children, etc.
What people at the same age group as Abshiek need to understand is that buying a term plan is like taking a step forward towards fulfilling your responsibilities. A term life insurance policy is not just about the financial security of your dependents but is also about staying prepared in advance for any miss happening like your sudden demise. Buying a term life insurance plan at a young age like 28 – 30 comes with its own advantages!
A very common question amongst people planning to buy a term life insurance plan is what is the right age to buy a term insurance. Though there is no specific age suggested to buy a term plan, but just like health insurance – the earlier you buy, the better it is. This is mostly because a person who is in his late 20s or early 30s is most likely to get a term life insurance at a lower premium in comparison to someone in his late 30s or early 40s or even in 50s.
It is always suggested to buy a term life insurance plan at an early age as it is pocket friendly. As you grow older, you are loaded with more responsibilities and at that stage, a term life cover becomes a necessity. With an increase in age, the premium also increases as you have more liabilities to pay.
To put it simply, if you want to avail all the benefits of a term life insurance at a lower premium, it is suggested buy a plan as you start earning.
If you are suffering from a life-threatening pre-existing disease, the chances of your term life insurance request getting rejected are quite high. One usually contacts a critical illness at an older age and thus it is advised to buy a term life insurance plan when you are in the best of your health which is mostly at a younger age.
The low rejection rate in young individuals is due to the least risk associated with individuals with no medical history. Most insurers deny providing a term life insurance cover to people with pre-existing ailments however, some insurers do provide cover to such people but at a very high insurance premium.
Apart from providing financial security to your loved ones in case of your sudden demise, a term life insurance policy even gives you living benefits. The premiums that you pay against your term life insurance plan qualify for a tax rebate under section 80C of the Income Tax Act. The amount of premium paid for life insurance is deducted from your taxable income and the maximum limit to avail tax benefit is up to Rs.1.5 lakh.
For instance, if you buy a term life insurance policy with yearly premium of Rs. 12,000, then you can get up 30 per cent tax rebate i.e. Rs 3,600 back as tax saving. This means you are technically paying only Rs. 8,400 as annual premiums.
Most importantly, the death benefit i.e. the sum assured that your dependents will receive in case of your demise would also be completely exempted from tax under section 10(10) D of the Income Tax Act.
Apart from financially protecting your loved ones in case of your sudden demise, term insurance is also beneficial during many other incidences, though you need to buy respective add-ons in order to avail those benefits. However, you must know that an insurer only issues an add-on to the policyholder after considering the current age and health condition. A person who is young and is physically fit can easily buy prominent riders like waiver of premium, income benefit rider, critical illness rider and accidental death benefit rider along with a base term life insurance plan.
The author is CBO-Life Insurance, Policybazaar.com. Views expressed are that of the author.