What is term insurance?
Term insurance is the simplest form of life insurance policy, which provides coverage for a specified period against life risk due to the untimely death of the insured during the policy term and pays a death benefit to the nominees to fulfil their financial liabilities and ensure a financial safety net for the loved ones. Term insurance plans are protection-oriented plans that aim to cover the risk of premature demise. This means that if the life assured passes away during the policy tenure, the death benefit is paid, which can support the family financially. Besides the return of premium plans, term plans have no maturity value. If the life assured survives the policy tenure, no maturity benefit is paid. However, return of premium plans refund the premium paid over the policy term on maturity and are, thus, different from basic term plans.
Reasons to buy Term insurance
Here are some of the reasons to consider buying a term insurance policy:
1. Affordable Premiums
Term insurance generally offers affordable premiums in comparison to other types of life insurance policies, allowing you to secure substantial life cover without high premium costs.
2. Tax Benefits
Investing in term insurance offers tax benefits under relevant sections of the Income Tax Act, of 1961. You can claim a deduction on your annual premium paid for term insurance plans under Section 80C of the Income Tax Act under old tax regime and also get tax-free death benefits under Section 10(10D) subject to provisions stated therein.
3. Flexibility
Term insurance plans offer the flexibility to choose the coverage amount and the tenure of the policy based on your insurance needs and financial goals.
4. Add-on riders
You can also customise your term insurance policy with add-on riders such as critical illness riders, accidental death benefit riders, etc. to enhance the scope of your term policy at an additional premium cost.
5. Peace of mind
Term insurance policies provide the much-needed peace of mind that your family and loved ones are financially protected and secured even in your absence.
The best age to invest in a term insurance plan:
The right age to buy term insurance varies from individual to individual, depending on family and financial circumstances. In general, you need a term life insurance policy if you are the breadwinner of the family and have several dependents on you or if you have outstanding debt, which will continue after your death. Life insurance becomes more expensive with every passing year, so the sooner you buy one, the better. As people grow old, they may develop health problems, which can increase the premiums while buying a term plan . While there's no one-size-fits-all answer, here are term insurance benefits for each age group range, presenting unique opportunities for securing coverage and guiding the answer to when I should buy term life insurance:
1. In your 20s
The simplest answer to when to buy term insurance is your 20s as the premiums at such an early age are lower with comparatively fewer financial obligations on the individual making it preferred time to buy one. As people age, their financial responsibilities increase significantly. Further, the risk of medical diseases and health problems is much lower in the 20s ensuring eligibility.
2. In your 30s
The need for term insurance increases as one settles into a career and starts families in their 30s. At such age, you may have dependents who rely on your income. Term insurance provides them the financial security in your absence to lead a financially stable life. Premiums in your 30s will be reasonable compared to a later age, making it a wise investment decision.
3. In your 40s
While the premiums for term insurance may increase in your 40s, buying one can still be advantageous especially if you have long-term financial goals such as your child’s education, their marriage or outstanding loans or debts such as home loans, etc. Many insurance companies offer term plans to cater to individuals in this age bracket.
4. In your 50s and beyond
It’s never too late to consider buying a term insurance policy. While the premiums at an older age are higher due to high mortality risk, for those with ongoing financial responsibilities and preparing for retirement. Term plans act as a security net for your spouse when you are not around to enable them to lead a financially stable post-retirement tenure. However, before buying a term plan, ensure you are eligible, given your medical and health conditions and the terms of the term insurance policy.
The Factors to consider when deciding the age to buy term insurance
It is suggested that you buy a term insurance plan as early as possible to enjoy maximum benefits. If you wait too long to buy one, not only does it become expensive, but it also becomes harder to get the policy approved by the insurance underwriter. Here are some of the factors to consider when deciding the right age to buy term insurance:
5. Financial Responsibilities
Assess your current and future financial responsibilities and obligations. If you have several dependents such as a spouse, children, or ageing parents), it’s essential to ensure early coverage to secure them financially. The more responsibilities one has, the earlier one should consider buying a term policy.
1. Income Stability
It is also necessary to consider your income consistency and job security when deciding the best age to buy term insurance. If you have a stable job with a reliable income, it is a good time to buy insurance.
2. Health Status
Your health plays an important role in determining the premiums. Buying term insurance when you are healthy and young usually lowers premiums. Also, if you have pre-existing medical conditions, it may be more challenging to get affordable coverage later on.
3. Financial Goals
Consider your financial goals and objectives, such as buying a home, investment plans, your child’s education or saving for retirement. Term insurance enables you to allocate funds to your financial goals while ensuring you have life protection in place.
The right age to buy a term plan based on different situations
Deciding the right age to buy a term insurance plan can impact your financial safety and the well-being of your family. You can consider some of the following situations when deciding when you should buy term life insurance.
1. If you are the sole breadwinner of the family
For sole breadwinners of the family, it is essential to consider term insurance as early as possible as it ensures that your family is not left financially strained to meet day-to-day expenses. A term insurance policy enables them to cover their essential expenses such as daily living costs, housing, and education, providing peace of mind for you and your family.
2. If you have a tight budget
If you are beginning your career or managing student loans, your budget may be tight and constrained. In such a case, you can consider buying a basic term insurance policy as even a smaller coverage can provide vital financial protection at an affordable premium. As your financial situation improves, you can increase your plan coverage later.
3. If you are starting a family
Starting a family is also a good time to buy term insurance, as it may lead to additional financial responsibilities, including spouse & child care and education. Acquiring insurance coverage at this time ensures that your family’s financial future is protected regardless of what the future holds.
4.If you are planning to buy a home
If you are planning to take on a mortgage for a home, it can be considered ideal for buying term insurance. This will safeguard the financial future of your family if you pass away before the mortgage or the home loan is paid off, ensuring they do not face financial strain.
Conclusion
When buying term insurance, younger is usually better. The longer you delay it, the more expensive it will become. Further, if you wait for too long, you are at risk of declining health, which could further increase your premium rates or even make you ineligible for certain policies. The best age to buy a term life insurance policy varies based on your family situation, personal circumstances, finances, and obligations.
Frequently Asked Questions
1. Who is eligible for term insurance?
Individuals who qualify on the eligibility parameters of insurance companies can buy a term insurance policy although eligibility may vary by insurance company and terms of the term insurance policy.
2. Can I buy term life insurance if I'm older?
Yes, older individuals can also buy term life insurance, but the premiums for the policy may be higher due to age and potential health issues.
3. What are the factors that affect term insurance premiums?
Key factors that affect term insurance premiums include age, health, lifestyle habits (such as smoking), gender, and the family medical history1 amount other factors.
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