Many individuals in their twenties tend to believe that life insurance isn’t for them. While looking for financial tools with high returns, insurance plans are often overlooked. But is a life policy really worth the effort? Let’s go through the top three reasons why bachelors in their early twenties should definitely consider insurance plans as the best investment option.
Why You Should Purchase Life Insurance in Your Early 20s?
Here are some benefits of life insurance plans that you can avail for the long term:
As security against risks
It is common for bachelors to take on higher risk in their early twenties. This could be in regard to buying a house, their investment choices, and many others. In case something were to happen to you, your parents would be left with the burden of your debts. If you are still paying off your past education loan or have taken a high home loan, you would prefer leaving your loved ones with a financial backup. But how do you arrange that when you already paying off loans? The answer is life insurance.
With a monthly cost-effective premium, you can easily secure a high sum assured with term insurance. The insurance coverage would be much more than the amount you can save up with your income. Thus, your family would have financial independence in your absence with the help of insurance. Check out the life insurance calculator to know how much premium you need to pay now!
Affordable premium rates
Insurance policies are much cheaper when the policyholder purchases it at a young age. This is because in your early twenties, you are perceived to be healthier without any medical issues. Thus, the insurance provider takes on low risk while offering you coverage at a young age. So, it is advised to opt for suitable types of life insurance policies that satisfy your needs early in life.
Just to understand the premium rate difference, you can look at the insurance price for a policyholder of your age and a person in their late thirties. The premium quote shall be much higher. Therefore, reap the benefits of affordable premium costs by making a smart investment choice. Now that your policy cost is low, you can also add riders to your plan for maximum coverage. But it is advised to avoid going overboard with the riders and buy the ones that suit your requirements.
Tax benefits
Though you won’t fall under the tax slab as you begin your first job, it is good practice to opt for tax saving instruments early on. As life plans have a long policy tenure of at least 20-25 years, you can avail the tax perks later. The premiums paid towards the insurance plan can be claimed under Section 80C of the Income Tax Act, 1961. A maximum limit of INR 1.5 Lakh is allowed per financial year. Apart from this, you can also claim the death benefit as tax-free under Section 10(10D) of the Income Tax Act. In case you choose to buy insurance plans with a savings or investment component, then the maturity amount can also be claimed as tax-free under Section 10(10D). Therefore, you not only avail a life cover with insurance but also end up saving on taxes for the long term.
Different Types of Life Insurance Plans
- Term plans: Such policies are pure risk covers that offer financial security to your family in your absence. The premiums for term policies are much more affordable when compared to other plans, as it doesn’t have any survival benefits.
- Endowment plan: This is a policy with a life cover plus savings component where you can avail a maturity benefit on outliving the tenure.
- Unit-Linked Insurance Plan: ULIPs provide a life cover and an investment opportunity to earn high returns.
- Money-back insurance: With such a plan, you get regular payouts every fifth year along with a maturity benefit on policy expiry.
Life insurance has become a crucial investment option for many earning individuals as it helps secure a monetary backup. So, purchase an insurance plan today and safeguard the future of your loved ones!