Currently, some of you might be preoccupied with getting your career off the ground, meeting basic expenses and figuring out how to handle all the responsibilities of being an adult. And life insurance is probably the last thing on your mind. But, here’s the truth — if you look at life from a clear viewpoint, your 20s is not just about you anymore. It becomes increasingly important about the people you love and share the financial responsibilities with. And when you have people who are dependent on you financially to pay their bills, it’s time to ask yourself an important question: Should I get life insurance in my 20s?
And the answer: It depends on how ready you want to be for unexpected times. Basically, your 20s begin with having the right tools and having life insurance is the ultimate financial tool for those big ‘what if’ moments. Life insurance is a valuable and versatile tool that can help you in dealing with a variety of financial problems. It can be useful even when the death benefit is not triggered, as long as it is used appropriately.
We have now told you the short answer to ‘Should I buy life insurance in my 20s’ is Yes. However, to understand why to get life insurance in your 20s, it’s important to understand how this business works. Here are some reasons why buying life insurance at a young age is a smart move.
Life insurance premiums are cheaper when you are young and healthy
When an insurance company is assessing you as an applicant, they are basically looking at the risk — the risk they’ll have to pay out in terms of money you have in your coverage. However, for any insurance company the younger you are the lesser the risk. Let’s try to explain this in more detail. One of the biggest benefits you get of buying a life insurance in your 20s is low premium rates. This is because companies decide the rate of premium depending on your age. In general, young adults enjoy better health and are less prone to any chronic disease which will equate lower monthly premiums with no exclusions. However, on the other side, an advanced age is a sign of increasing health issues and higher chances of claims. That’s why old people are charged high rate of premiums.
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Below are the premium comparisons of Term insurance offered by 5 prominent insurers for 25-year-old, 35-year-old and 45-year-old males covering up to 70 years, residing in a metro city. The total sum assured is Rs 1 crore.
As you can see from the table that as your age climbs, so do your premiums for a term policy. A 25-year-old non-smoking man is able to get the same Rs 1-cr policy for Rs 7,557 a month whereas for a 35 and 45-year old the same policy costs much higher.
Get coverage for a longer period
Buying a life insurance policy not only provides you with the benefit of low premiums, but also allows you to enjoy a longer period of cover. If bought life insurance at the age of 25, then you can enjoy the coverage benefits for almost 50 years. However, if you buy life insurance at the age of 40, your coverage will be less than 35 years. Longer period of cover makes sure that you are financially secured at most of the stages of life.
Improves your Finances
Most people usually tend to overlook this benefit. However, early investment develops a positive spending habit and inoculates financial discipline ensuring unnecessary expenses are avoided. It helps you to organize your savings and keep your monthly budget simple. Those who learn the investment rules early are careful with their money and much less likely to have issues over the long run.
(By Santosh Agarwal, Chief Business Officer-Life Insurance, Policybazaar.com)