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Importance of Buying a Life Insurance Policy at an Early Age

Updated on July 2, 2016

Why Invest?

If you’ve started earnings, it’s already time to begin saving. However, with India’s inflation rate averaging 7.70% from 2012 until 2016, according to figures published by Trading Economics, saving alone eats into the future value of money. Therefore, there’s a strong need to invest money into lucrative financial instruments.

Why Invest Soon?

The sooner you begin investing, the greater will be the chances of reaching your financial goals. These could be very short-term goals, like buying a car, longer term goals, like retirement planning, or the ultimate goal of securing the financial future of your family long after you are gone.

Life Insurance Is Unique

Life insurance is a unique financial instrument that offers several advantages not offered by others instruments, says an article on Gateway Financial. This is particularly the case if the policy is chosen wisely and early.

A life insurance policy offers:

  • Significant financial protection against the risk of death of the policyholder
  • Favorable tax treatment (premiums are deductible under Income Tax Act, death benefits are tax free, policy loan is tax free)
  • Option for steady income after end of premium payment term
  • A high degree of flexibility

Lower Premium Rates at Young Age

Age is one of the most critical components when calculating life insurance premium. Whether you choose a term policy or a permanent one, the premium rates will always be at their lowest when you are young and in the best of health conditions. When a company sells insurance to a person, it assumes the risk of the applicant making a claim. In the case of a life insurance policy, the ultimate risk is death of the applicant. This is more likely to happen when the applicant is older.

Moreover, the longer the policy lasts, the more money the insurer accumulates in terms of premiums. Therefore, insurers are willing to offer lower premium rates to younger customers. Thus, it is beneficial for you to take a life insurance policy when you are younger since you can get a large cover at the lowest of rates possible. An article in the Forbes Magazine states that buying insurance at a younger age and at a lower premium rate is advisable because even if something happens to your health in future, the premium amount would still be based on the health at the time of purchase of the policy.

Flexibility on Retirement

With the growing insurance section, there are several options available in India. As one grows older, their responsibilities increase and it may be desirable to opt for investments that take into account various milestones. Today one can choose a whole life plan that not only provides cover on death of the policyholder, but also the option of a steady income (survival benefits) that are payable annually from the end of the premium paying term till maturity, say experts at Birla Sun Life Insurance. Thus, this is a hybrid plan, which is a blend of regular income and financial protection for the family.

Of course, when you are younger, you can choose a plan with a later maturity period, thereby receiving income for more number of years. Even with the same maturity period, such a plan would offer you the flexibility of retiring early.

While some plans offer regular income, others guarantee a maturity benefit. With the plethora of choices available today, one should spend time choosing the right plan. Also, it’s very important to choose the right insurance company. Nonetheless, what is for sure is that the sooner you begin paying the premiums, the better the returns you would enjoy.

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