Young professionals often focus on short-term financial goals like saving and investing, but many overlook the importance of securing their future with adequate risk cover. Planning for long-term financial security is just as crucial. Term insurance offers a simple and effective way to ensure financial protection, especially when purchased early in one’s career. It brings practical benefits like affordable premiums, high coverage, and tax savings, and it could be considered a part of any young professional’s financial plan from the start.
What is Term Insurance
Term insurance provides life insurance coverage to individuals for a defined period. Unlike unit-linked or endowment plans, term insurance does not have any investment component; it only pays a death benefit to the nominee if the policyholder passes away within the term. Thus, term insurance is more affordable than other types of life insurance. This offers young professionals a simple, affordable plan with clear terms and no hidden fees.
Benefits of Buying Term Insurance Early
Lock in Low Premiums at a Young Age
Insurance companies generally charge lower premiums to younger and healthier people. As a young professional, acquiring term life insurance in your twenties or early thirties offers you the advantage of having good rates and high coverage for the entire term of the policy. Locking in low premiums early can lead to substantial savings over the life of the policy.
Financial Security for Dependents
Young professionals often take on the responsibility of caring for their families. Many look after their ageing parents or help their siblings or extended family with their finances. A comprehensive term insurance policy can help ensure your family is cared for if you are no longer there to support them. For example, if you are the primary source of income for your ageing parents, a term insurance plan can help them financially in the event of your demise.
Covers Liabilities and Loans
Young professionals often take loans to finance their education, housing, or first vehicle. If they pass away prematurely without life insurance, this could leave family members with huge debts to cover. A term insurance payout can cover outstanding liabilities, so loan repayments don’t become a burden on your family. For example, some plans offer decreasing coverage that reduces in line with your loan balance, so the payout always matches what’s still owed.
Tax Benefits Under Section 80C and 10(10D)
The tax benefits of term insurance make it an appealing choice for young professionals. Premiums paid for term insurance policies are eligible for tax deductions under Section 80C of the Income Tax Act up to ₹1,50,000 per year. Additionally, under Section 10(10D), the death benefit paid to nominees is exempt from tax, potentially lowering the policy’s overall cost.
Peace of Mind and Financial Discipline
Buying the right term insurance policy gives you peace of mind that your loved ones will be protected financially if you are unable to do so. Additionally, the habit of paying regular premiums instils discipline in savings that can be used to achieve other financial goals such as creating an emergency fund, saving for a home, or paying for the education of a child.
Conclusion
Term insurance is an affordable option for many young professionals in India. With its low costs, broad coverage, and tax advantages, it’s a great way to protect your loved ones. Assess your condition and pick the best term insurance policy for you. You can even use a term insurance calculator to calculate the right cover and premiums. Remember, buying insurance early ensures financial stability and peace of mind for you and your family.