In general, life insurance plans are seen as an investment that can be taken into account as you get older. Young investors frequently favour investing in high-risk, high-reward options like stocks and commodities. Even traditional millennials frequently choose investments like debt mutual funds or fixed deposits. Insurance is neglected in favour of investment strategies that promise more rapid financial gains. Buying a single life insurance policy in your 30s and anticipating to be sufficiently protected even in your 50s may not be such a good idea.
Insurance companies have certain underwriting rules that are based on the insured’s yearly income, age, and ability to pay the premium. When considering the size and demands of the family, one insurance policy may not be enough to cover all of the needs. A policyholder will be eligible for a maximum total sum insured of 25-35 times his annual CTC when they are younger and up to 10-15 times their annual CTC when they are older. It is usually preferable to maintain enough coverage up to the highest allowable level.
But the fact remains that purchasing life insurance early has many benefits. A life insurance policy must be purchased in anticipation of your requirement. There are various reasons why it should be purchased in youth. Because the premiums are cheaper and you may get a large life cover for a very low premium, the optimum time to buy a life insurance policy is while you’re young. You’ll understand why investing in life insurance plans early in your career should be a crucial part of your retirement planning once you’ve learned about its advantages.
Here are some of the many benefits of life insurance:
You receive reduced premiums.
In the long run, buying life insurance early can save you money. The insurer frequently takes the applicant’s age and general health into account when calculating the premium due. You typically have better health when you’re in your 20s or 30s. Due to this, premium fees are less expensive than those assessed for older investors. Because your risk of passing away is significantly lower when you’re younger, purchasing life insurance plans early results in lower costs. It is, therefore, advisable to purchase life insurance early in life in order to benefit from this provision.
You have enough time for your money to grow.
Your money has a longer time to grow when you purchase life insurance plans when you are young. Because of this, investing when you are in your twenties will also increase the death or maturity benefits you will receive at the end of the policy’s term. For instance, if you purchase a life insurance policy at age 25 and keep paying the premiums until you are 60, you have 35 years to build up your retirement fund. However, if you wait until you are 40 to purchase the same life insurance, you will only have 20 years to see your money grow. Thus, making an early investment can boost its cash value over time.
The future of your family is assured.
By the time they reach retirement age, the majority of people will typically have built up a sizable corpus to support the stability of their family. Most people’s children would be old enough to go to college or might have their own job by the time they were 50 or 60. Your family may be more at risk, though, if you’re still young and just starting out in your career. Your spouse and young children might have a harder time adjusting in the unfortunate event of your passing away without a financial safety net. This benefit can be given to your dependents by early life insurance investment.
You receive tax advantages.
In addition to the previously mentioned benefits, investors can receive life insurance tax benefits from life insurance plans. According to Section 80C of the Income Tax Act, an investor’s life insurance premiums paid during a given fiscal year are deducted from their overall income. For premium payments up to Rs. 1.5 lakhs per fiscal year, this benefit may be claimed. Therefore, if your annual premium payments total Rs. 1 lakh, you may deduct the entire sum from your income. This consequently reduces your tax obligation. When you purchase life insurance earlier in life, your tax burden will be lower when you most need it. The Tax benefit is subject to change in tax laws.
Note: As of 2021, one can opt for two tax regimes in India – new and old. To enjoy the tax advantages of life insurance, one can choose the correct regime after consulting an expert.
Once you turn 18 years old, you can start investing in a life insurance plan and get life insurance tax benefits. Depending on the stage of life you’re in, you can also purchase insurance that meets your specific needs and make plans for a protective cover. Your financial objectives, which might involve pure protection or wealth management and growth, can also influence the plan you choose. Therefore, make an investment to reap the benefits of life insurance.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.