What Are Term Insurance Plans?
Term insurance plans are insurance plans that offer life coverage for a certain period. Term insurances also offer a benefit of ‘sum assured’, where the family member or the designated nominee gets a pre-decided amount in case of the death of the policyholder during the policy tenure. Not only that, but there are several other term insurance benefits you can enjoy within your policy, such as tax exemptions, accidental cover, disability cover, survival benefits and much more.
Choosing a Term Insurance Plan When You Are Young
When someone is young and just starting to earn, they can’t wait to enjoy their financial independence. In fact, a lot of people have a wish-list ready for things that they are going to buy or do with their first salary. With dreams of a successful life ahead, thinking about death and getting an insurance coverage for their life is the last thing on their mind. Also, some youngsters already have a debt of student loans and financial responsibilities thrust upon them, which makes buying a term insurance plan the least of their priority.
Also Read: 7 Mistakes to Avoid When Buying a Term Plan
However, what they do not realize is that buying a term insurance plan at a young age can offer them several benefits such as-
- The chances of being diagnosed with critical illnesses are significantly less when you are young. As a result, the premium set on term insurance is much less while you are young.
- Term insurance plans also offer the flexibility to change the premium amount or insurance coverage over time. Thus, when you start out young, you might not afford to pay higher premium amounts and opt for a basic term insurance plan. However, as and when you make financial progress in your career, you can increase the premium amount according to your convenience, without changing your plan.
- The death benefits offered under term insurance plans ensure that your loved ones are not left with any financial debts or without any financial support upon your death.
- Another major reason to buy term insurance when you are young is the tax benefits. All the amount that you pay in the form of your insurance premium (up to INR 1,50,000) or the sum received upon maturity is tax deductible under the Income Tax Act.
How to Choose the Term Insurance Plan When You Are Young?
- Not everyone starts earning at the same pay scale. Thus, of the plethora of term insurance plans available in the market choose the plan that offers the most compatible premium according to your existing financial condition.
- Some term insurance providers also include critical illness rider as well as partial/permanent disability cover as add-on benefits. Make sure you ask for the inclusions of such add-on covers in your term insurance plan.
- Make sure that you check the credibility and integrity of the insurance provider before buying a term insurance plan with him/her. You can go through the customer feedback or the testimonials provided on the insurance provider’s website for the same. Another good way to check your insurance provider’s reputation is to inquire about their claim ratios and insurance solvency ratio.
- Make sure that the insurance provider offers ease of buying for the term insurance plan. For instance, check if you can easily apply online for term plans from your insurance provider. The minimal documentation required for the application process makes buying these term insurance plans less of a hassle.
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The importance of buying a term insurance plan at a young age cannot be stressed enough. Apart from the key points discussed above, it is also your responsibility to make the premium/claim judgment based on your age, financial responsibilities as well as your long-term financial needs. In case you are having trouble with determining any of these aspects, you can always take the help of financial advisors to help make the choice for you.