Human life is a frail, unpredictable thing. We are constantly surrounded by uncertainties that endanger our lives no matter how shielded we stay. But it is also human nature to try and minimise the likelihood of such events, or at the very least, try to prune down the crippling effect that the loss of life can have on others.
Life insurance is an arrangement through which you make provision for the unpredictable nature of life, in terms of financial protection. It is a contract between the policyholder and the insurance company, where thelife insurancecompany pays a specific sum to the insured individual’s family upon his death. Thelife insurance sum is paid in exchange for a specific amount of premium.
The question, then, arises – what is the best age to start planning for alife insurancepolicy? No one is immune to health scares, sudden death or accident. These eventualities can strike anyone’s door without prior notice, irrespective of age. Therefore, the common and wise response to this question would be thatlife insuranceshould be bought as soon as you start earning. A few things to consider in respect of the age conundrum are discussed below.
For starters,life insurancepolicies are often aimed at helping your dependents who are mentioned as the beneficiaries in the policy. Therefore, it would make sense to buy a life insurancepolicy only when you have dependents. This is true, except that there are instances where life insurance can be beneficial even if you have no dependents. Life insurancepolicies available today could be directed at other goals beyond just providing for the family in your absence, and these goals could include wealth creation, asset protection, critical illness coverage, or to pay off debt. If you have a home loan, or you plan to send your child overseas for higher education or build that farmhouse post-retirement, life insurancewill come in handy for all your financial needs.
Thus, the rule of thumb may be that you buylife insurancewhen someone depends on your income, irrespective of the age, but as a generalisation, your 20s are a good time to embark on this journey, but you should definitely enter your 30s with life insurancein hand. Whatever drives the need, term insuranceor any other non-traditional life insuranceproduct is a comfortable financial cushion to fall back on.
Additionally, age can also influence the terms of thelife insurancepolicy. Age is one of the critical factors in determining the amount of premium you will pay under alife insurancepolicy. The rule of thumb here is that the younger and healthier you are, the less expensive it is.
This is because, as you age, the likelihood that an insurer will have to pay out on your policy increases since ageing makes us more susceptible to health concerns, more vulnerable to catastrophic accidents and the like. This is why between a 44-year-old and a 29-year-old, the former will pay more premium on the same policy even if they are in the absolute same condition in all other respects. Buying young also makes the process a lot smoother, as against buying when you’re older, which would entail undergoing more tests and medical check-ups demanded by the insurer.
Further, it is also a good idea to buy term insurance early because of the tax benefits it accords. Tax deduction under Section 80C of the Income Tax Act, 1961 allows exemption up to Rs.1.5 lakh per annum.
Lastly, you can start planning forlife insuranceearly and even get on board the policy, but it is advisable that you revisit the policy every now and then to align it with the current scenario in your life.