If you are right now in your 20s, then you are likely to spend most of the time focusing on strengthening your career, meeting basic expenses, and learning to balance the responsibilities of adulthood. Amidst all this, life insurance might be at the end of the list in your head or probably not a part of the list.
The risks and uncertainties of life hardly seem to strike when people are in the 20s. Therefore, insurance doesn’t count as an option in the to-do list of many youngsters.
But if you pay attention, then 20s is the time when your life not only puts responsibilities on your shoulders but also adds others’ responsibilities. By others, we mean your loved ones, your family, who are financially dependent on you. When they are financially dependent on you, it is your responsibility to ensure that they suffer no burden in case of an unfortunate event. Instead of asking yourself if you need to buy life insurance, ask yourself how ready you are to face uncertainties in life.
A life insurance plan is a versatile tool that helps to deal with various financial problems. A life insurance policy can be beneficial even when the death benefit is not triggered unless you use it appropriately. To do so, you must know how a life insurance plan works.
Life insurance is a contract between the insurance company and a policyholder, in which the policyholder pays a certain amount at regular intervals called the premium, and in exchange, the company promises to pay the sum assured against certain risks specified in the contract. The term of the policy and the sum assured can be chosen by the policyholder. The company gets to decide the amount of premium to be paid.
Typically, there are two types of basic life insurance policies: term life insurance and whole life insurance. A term life insurance plan secures you for a specific term that is time, whereas a whole life insurance plan covers you for a lifetime.
Here are a few reasons why you should buy life insurance while you are in your 20s-
- Lower premiums – The rate of premiums is decided by the insurance company. While deciding this, they consider various factors like the term, the sum assured, etc. One of the factors is the risks subject to the policyholder. In the 20s, you are fit and healthy. Hence, the rate of premium is lesser as compared to that of a senior citizen suffering from various diseases like diabetes, high blood pressure, etc.
- Less prone to rejections – Your proposal for term insurance is more likely to be rejected in case you have a severe illness. This is because the risk of death is high due to the medical condition. But if you are in the 20s and healthy, then the risks are less. Hence, your proposal is less likely to get rejected.
- Saves tax – Life insurance comes with the benefit of tax exemption under Section 80C of the Income tax act. Also, the sum assured that is paid to the policyholder’s dependent in case of the insured person’s death is exempted from tax under Section 10(10)D.
- Covers for a longer period – The younger the age in which you invest in life insurance, the better benefits you get to enjoy, and one of the major benefits is you can enjoy coverage for a long period. In case you buy life insurance at the age of 23, you can enjoy the coverage for almost 50 years. Whereas, if you buy life insurance at 40, then you get covered for only 30-35 years.