Life Insurance Term Plan: Should Young Adults Choose One?
Life in your 20s and early 30s is full of new beginnings and excitement. Getting a job, starting a family, building a career, travelling, and more. Amid all this, it is common for people to miss out on an essential financial plan, life insurance. Generally, people consider a life insurance term plan as something that needs their attention in their late 30s or 40s.
However, perceptions are now changing as people are finally acknowledging the importance of early purchase of term plans. Yes, life insurance need not be a mid-life plan, but rather a quarter-life requirement.
Buying life insurance plans as young adults has multiple benefits. Apart from the life insurance protection, you also get benefits like lower premiums, tax benefits, and so on. Let’s discuss why young adults should choose life insurance early in life!
What is a Life Insurance Term Plan?
Life insurance can be of different types, and term insurance is one of these. A term insurance plan is primarily a life insurance policy that provides financial cover against the unfortunate death of the life assured. This means the nominee receives the financial aid in the form of a death benefit in the event of the death of the life assured during the active tenure of the policy.
Unlike various life insurance policies, term insurance offers only life insurance and no element of investment or savings. However, you have the option of the TROP, TERM Return Of Premium plan. It is a type of term insurance where the life insured receives all the premiums paid back as a survival benefit if they outlive the policy tenure. Such policies may have higher premiums than basic term insurance plans.
Reasons Why Young Adults are Choosing Term Life Insurance
Did you know that millennials, especially self-employed individuals, have witnessed over a 50% increase in the purchase of term plans? Well, there are various reasons behind it. Here are some of the striking reasons mentioned below:
- Tailored Products
Young adults in India are entering various sectors of the economy that were previously less explored. For instance, entrepreneurship and freelancing have become increasingly popular in recent years.
Owing to this shift of interest, insurance companies are also now offering tailored plans that meet the specific needs of different individuals. There are now plans specific to young entrepreneurs, freelancers, working women, and so on.
- Ease of Purchase
Gone are the days when purchasing an insurance policy required people to take a day off from the office. Now, you can purchase policies from anywhere and almost any time. All you need is an internet connection and a screen. This ease of purchase has further accelerated curiosity among young adults to learn about policies, their importance, and purchase within a few taps.
- Increased Awareness
The awareness of the need for a term plan, combined with the uncertainty of life, has driven more and more people. This trend has become even more prevalent after the COVID-19 pandemic.
- Affordable Premiums
At a young age, people often get a preferred life insurance policy at lower premiums. The same policy may become costlier for someone in their 30s or 40s. So, the benefit of lower premiums early remains a leading cause.
- Financial Knowledge
With time, people are focusing more on smart financial planning. It comes with efficient tax management as well. Purchasing a life insurance policy means tax benefits. So, that’s another popular reason why young adults prefer life insurance plans early in life.
Benefits of Term Insurance for Young Adults
What happens if you purchase a life insurance plan at a young age? You can expect a range of benefits. Some of the most essential ones are listed below:
- Low Premium
As discussed above, young people are more likely to get term plans at lower premiums. This is because during a young age, people are usually disease-free. This helps them get a lower premium.
- Tax Benefits
When you pay a premium for life insurance plans, you also become eligible for tax benefits. Section 80C of the Income Tax Act of 1961 offers tax benefits of up to ₹1.5 lakhs, and Section 10(10D) of the Income Tax Act of 1961 makes the death benefit tax-free.
- Longer Financial Cover
Purchasing a life insurance plan at a young age means you can get financial cover for a longer period. If you are in your 20s or 30s, you can pitch for a longer tenure than someone in their 40s or 50s.
- Financial Protection
As a young adult, financial security for your family can be one of the best gifts to them. It is the much-needed peace of mind for anyone, especially the earning member of the family. Even if you are not the sole breadwinner in the family, the benefits of life insurance can be a promising legacy to be left behind.
Conclusion
A life insurance policy has become one of the basic parts of financial planning. However, it must not be left for the later years of life. If you haven’t yet planned one, now is the right time to get started. Do not delay, but benefit from the early purchase of life insurance term plans.
