 "Why are 20s considered the best time to buy term insurance?")
Many young adults believe that investing in a term plan is a distant concern, something to be addressed later in life. However, most experts believe that your 20s are the ideal time to pick up a term plan, and here is why.
Lower premiums
One of the most significant advantages of buying a term plan in your 20s is the lower premium amount. Insurance companies consider your age and health condition when deciding the premium amount, and naturally, you are healthier in your mid-20s. This translates to lower premiums compared to purchasing a term plan later in life.
Increasing life cover at a lower cost
As your family, income, lifestyle, and financial responsibilities grow, so should your term insurance cover. If you buy term plans that let you increase your life cover within the existing policy, you can secure the additional cover at a lower premium cost.
Let us compare the term life plan by different companies for 25 year olds and 40 year olds.
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HDFC Life
25-year-old: Rs 1 crore coverage for 30 years: Rs 14,000 per annum (Rs 1,167 per month)
40-year-old: Rs 1 crore coverage for 30 years: Rs 43,616 per annum (Rs 3,634 per month)
Max Life
25-year-old: Rs 1 crore coverage for 30 years: Rs 12,000 per annum (Rs 1,000 per month)
40-year-old: Rs 1 crore coverage for 30 years: Rs 43,616 per annum (Rs 3,634 per month)
Tata AIA
25-year-old: Rs 1 crore coverage for 30 years: Rs 10,000 per annum (Rs 833 per month)
40-year-old: Rs 1 crore coverage for 30 years: Rs 43,616 per annum (Rs 3,634 per month)
Bajaj Allianz
25-year-old: Rs 1 crore coverage for 30 years: Rs 12,000 per annum (Rs 1,000 per month)
40-year-old: Rs 1 crore coverage for 30 years: Rs 43,616 per annum (Rs 3,634 per month)
ICICI Prudential
25-year-old: Rs 1 crore coverage for 30 years: Rs 14,000 per annum (Rs 1,167 per month)
40-year-old: Rs 1 crore coverage for 30 years: Rs 43,616 per annum (Rs 3,634 per month)
These premiums are based on the assumption that the policyholder is a non-smoker and the coverage is for 30 years. The actual premiums may vary depending on individual factors such as health status, lifestyle, and other factors that can affect the premium.
Amit Jaiswal, Chief Balic - Direct Officer at Bajaj Allianz Life said, “When it comes to purchasing term plans, the thumb rule is ‘the earlier, the better!’ Buying a term plan in your 20s is one of the smartest financial moves you can make. At this age, premiums are significantly lower due to your better health, allowing you to secure extensive coverage at an affordable cost.”
You might not realise that you still have dependents in your 20s.
Maybe your parents are about to retire in the next few years and funding your studies didn't allow them to grow their investments making you their sole bread earner once they age. And although no amount of money can replace you, it sure can give that added financial support in your absence.
Tax benefits
Investing in a term plan can also provide tax benefits.
As a term insurance policyholder, you can claim a deduction on your annual premium payments under Section 80C of the Income Tax Act. This makes a 20-year term insurance policy a good addition to your tax-saving plan.
Talking to Business Standard, Srinivas Balasubramanian, Chief Product & Marketing at ICICI Prudential Life Insurance Company Ltd said, “One needs to look at term insurance as a strong and stable foundation on which all subsequent investments and savings can be built on. So, when one is in their 20s and is in the process of starting off building their aspirations and the financial plans to achieve them, it is prudent to start by making the foundation with a term plan.
“This is also a prudent decision from a cost point of view because younger the age, lower is the premium. What’s more, since the premiums are constant throughout the tenure of the policy, one can get substantial cost benefit over the entire policy term by buying it at a younger age,” he said.