Life insurance for protecting loved ones Photo Credits – istock
Most youngsters ignore life insurance mainly because of they feel, it’s not required for them. They take life insurance simply for the sake of tax deductions, and often feel neglect its benefits thinking it’s not for them. It’s quite natural for them to feel so, especially if they are away from familial responsibilities. But remember, taking the same policy at different stages of your life have different impacts. The benefit gained from a policy taken at the age of 25, may be lower when the same taken at 40. A 20 year policy taken at the age of 25 would be very helpful for you during some days of financial need at the age of 45, like your child’s higher education, whereas the same taken at the age of 40 may not turn out a great help for you at your 60s.
Let’s have an analysis on the best time to take a life insurance policy.
Starting Early:
Starting out for life insurance at a young age has immense benefits. Since life insurance is based on the power of compounding, the earlier one starts investing, the lower the premium charges are. Another advantage of starting out young in life is that youngsters being fit and healthy do not require any medical checkups. Depending on the type of life insurance plan one opts for, life insurance offers multiple financial benefits along with the protective cover in case of any misfortune or sudden demise of the individual. Life insurance can be seen as a long term saving plan which keeps the money compounding while offering protective cover in case of any mishap.
Cost of Life Insurance Postponement:
The earlier one buys a life insurance policy, the lower is the premium. The best time to buy a life insurance plan is when a person is younger and fit so that he or she can easily earn and save some small amount as life insurance premium. Term insurance plans are well suited for youngsters.
Let us understand the advantages of starting out young with an example. Let us assume that an individual opts for a term insurance life cover of Rs.1 Crore at the age of 30 years. Since most term insurance policies expire at the age of 60, the individual will have a policy term of 30 years. The same person if he or she waits another five to ten years till he reaches 35 or 40 years of age reduces the policy term significantly thereby increasing the annual premium amount substantially.
| Age | 30 Years | 35 Years | 40 years | 45 Years |
| Cover | Rs 1 Crore | Rs 1 Crore | Rs 1 Crore | Rs 1 Crore |
| Policy Term | 30 years | 25 years | 20 years | 15 years |
| Approximate Annual Premium | Rs. 10,600 | Rs.12,600 | Rs. 16,200 | Rs. 22,200 |
Correlating Age and Term Insurance:
Considering the above example it is evident that age plays a significant role in deciding the quantum of life insurance premium to be paid every year. Premiums are cheaper for younger people considering the fact that they are fit offering lower risk for the insurer.
Get Adequate Cover:
A common mistake a lot of life insurance holders commit is not opting for a substantial cover for the policy. Make sure that your policy takes care of all basic expenditure for your family in case of your sudden demise. Major expenses like loan liabilities, education and marriage of children and medical expenses on spouse or partner must all be considered while calculating the final cover. Most insurance companies advise protection to the extent of 8 to 10 times the annual income of the insured.
Life Insurance Post 60:
Most insurance companies offer life insurance up to 60 or 65 years of age but if your family is still dependant on your earnings, it makes sense to consider insurance post 60 as well. Some insurance companies have now started providing life insurance for senior citizens who are still earning well in their 60’s. Buying life insurance late in life in not cheap as advocated in the article above. Dedicated senior life insurance plans are offered by various insurance service providers for people above 60 with premium paying term till 90 years of age. Senior citizen life insurance plans however come with various terms and conditions. Most policies pay out only 25% of the total premiums paid, in case the policyholder dies within two years of taking the plan.