Your professional journey will bring new responsibilities along with it. Of the many responsibilities, the well-being of your family tops the list. These include taking robust financial steps that help you create wealth, but also ensure a reliable safety net for your dependents.
Insurance is among the first few financial decisions that you may be required to decide upon. This includes defining your requirement and accordingly, finding a suitable insurance plan. Of the many alternatives, term insurance is a smart alternative that can be considered.
What is term life insurance?
Term life insurance is a type of life insurance cover that provides protection for a specified tenure to the insured. This protection is by way of providing compensation to the family members (dependents) in the event of an untimely demise of the policyholder. Thus, the family need not face a financial setback in the absence of a family member.
A term insurance cover is even more important in case the policyholder is the sole breadwinner, since dependents rely entirely on such an earning member for mental, as well as financial support. As a rule of thumb, it is advisable to seek term life insurance coverage 20-times your annual income. This ensures that future inflation can be combated in case of the specified event towards the end of the policy tenure.
Now that you are familiar with term insurance, here are some of the benefits that you can get when you choose to buy a term insurance plan early on in your life –
1. Affordable premiums
The primary advantage of opting for a term plan early in life is the premium for it. The human body is mostly free from ailments when young and healthy. At this stage, there is very little chance of an ailment or condition that the policyholder may suffer from. Thus, the risk that the insurance company must underwrite is also low, in effect keeping the premiums low. On the contrary, higher age attracts pre-existing ailments and various medical conditions when you buy term insurance. This pushes up the premiums and makes them steep for a substantial amount of coverage.
The reason why an affordable premium is a key benefit is because your policy’s premium does not increase for its entire tenure. So, even as your age increases, you end up paying the same premium. Although, this is subject to changes brought about by the policyholder such as an increase in coverage. Hence, in effect, you end up paying a lesser amount of premium as compared to the same policy bought years later in your life.
When you buy term insurance early in life, you can set your parents as the nominees and later modify it to include your spouse and children as your life stage changes.
2. Longer policy tenures
The advantage of buying a term policy early in life is that you can avail a plan with longer tenure. A 30-year policy period with a pocket-friendly premium helps you not only provide a financial cushion for your family, but also cover the financial liabilities that you may incur during this period (eg: a home loan). Thus, your dependents need not worry to pay off huge debts even in your absence. Your term insurance plan has got your back. To know how the premium varies with change in tenure, you can make use of a term insurance premium calculator.
3. Enhance policy coverage at an affordable cost
Another benefit of getting your term insurance early is that you enhance your sum assured at a lower price. If at any point in life you feel the need to enhance your policy’s cover, this can be done at a lower cost as compared to a policyholder who is older. Further, you can also opt for add-ons that can customise your term insurance coverage without spending a lot of money. A term insurance premium calculator is a nifty tool that comes in handy to determine how much these add-ons impact your overall insurance premium.
4. Affordable premiums allow for future investments
Early buying of a term plan allows you to spend a lower amount on insurance premiums. The balance amount can be then used to make investments in financial instruments that can help you prepare for your retired life. As your income grows in the future, the surplus amount can be used to make investments while your term plan has been locked at a specified premium.
With these unique benefits, you can make sure your family is protected even in your absence.