There are varied opinions on the right age to purchase Term Insurance, but there is a unanimous verdict on its necessity amongst today’s youth. Term insurance may be a pure life insurance product, giving benefits only upon the death of the policyholder, however, that has not deterred more people from seeking it out. 

The primary reason to buy a term insurance is to secure your dependants’ financial future. Sudden death of the breadwinner of the family can be harrowing for the family. It puts a lot of emotional pressure on the family, not to mention the financial implications it will have on the family’s future. There are numerous insurance products to secure your family’s financial future, but a term insurance policy should be an important part of your investment portfolio if you want to give the best financial security to your family in your absence. Therefore, the right time to buy a term insurance is as soon as you have dependants. A term insurance plan, like any other life insurance policy is age banded. As you age, the more expensive becomes the policy. 

There are hundreds of term insurance products available in the market today. They come with a number of benefits for the policyholder. Insurers allow purchase of term insurance plans from the age of 18 years up to an age of 65 years. These days term insurance policies can be conveniently purchased online to avoid unnecessary documentation and save time for the applicant. These online term plans offer additional discount on the premium rates and other benefits for the applicant. However, one has to carefully evaluate these products to find the right one to suit their needs. This article aims at listing out various points to help you decide the right age for you to purchase your term insurance plan. 

What Is A Term Insurance Plan? How Will It Benefit Me?

Before deciding the right age to purchase a term insurance plan, one has to understand how a term plan works. 

A Term Insurance plan is a simple product of life insurance that protects your family's financial future. The policyholder pays a regular premium on the policy throughout the term of the policy or for a limited period as chosen at the inception of the policy and the insurer pays a lump sum payment to the beneficiaries of the policy in case of sudden demise of the policyholder. No benefits are payable upon the policyholder surviving the term of the policy. The sum assured is payable only upon the death of the policyholder and not otherwise. 

However, a term insurance plan is very economical in that the premiums are much less compared to the final sum assured payable to the beneficiaries. Hence, it has been a most sought after plan amongst today’s generation, who want to provide financial stability to their dependants in their absence. 

Now for the ideal age to get a term insurance, there are many arguments. However, they all point out that earlier you get it the better. Getting a term insurance policy early in life has many benefits. Given below are some examples of how an early term insurance plan can help you. 

  1. Younger policyholder, lesser the premium: A term insurance is a pure life insurance product. It pays a lump sum amount to the beneficiary upon the death of the policyholder. A younger policyholder is healthier, poses less risk to the insurer and hence the premium is less. 

  2. Earlier you get the policy, more benefits you can add: When you opt for a term insurance at a younger age, you can easily add additional rider benefits like critical illness cover or life stage benefits, which may not be available as you age and contract lifestyle diseases like hypertension or diabetes. 

  3. You can be exempted from medical tests: Getting your term insurance policy at a young age will exempt you from medical test requirements. Older applicants are mandated to undergo a medical test to confirm their health status. This may have an effect on your premium rate.

  4. Get high sum assured for less premiums: When you start early with your term insurance, you get a lower premium rate but get a high sum assured on your policy. Let us look at an illustration here. This is for a popular term insurance product available in the market. As you can see, the younger you start your policy, the more the returns. 

Inception Age 22 years 30 years 40 years
Tenure 33 25 15
Monthly Premium Rs.2505 Rs.3728 Rs.7260
 Total Premium Paid  Rs.970814  Rs.1095414   Rs.1281573 
Total Returns  Rs.5417000  Rs.3675000 Rs.2635000

 

  1. Get to live a stress free life: People assume insurance is something to think about in the evening of your life. But with growing lifestyle related diseases, the life expectancy of humans is not very assuring. More and more individuals are affected by critical illnesses at a very young age rendering them unemployable and thus blocking the only source of income for the family. Getting a term insurance at a young age gives you options of critical illness cover that can cover your medical expenses and also take care of your family in case of your untimely demise. That should allow you to live stress free. 

  2. You can assign a term insurance policy towards other loans: An Assignment of an insurance policy acts as a security on loans you take from banks. When you assign your term insurance policy for a loan, like a home loan, in case of your sudden demise, the lender will take the outstanding loan amount from the insurance benefit and pass on the remaining amount to your beneficiaries. This way you can assure that your family members are not harassed for outstanding loans you took while alive. 

  3. Get the bonus of tax benefits: The premiums paid towards your term plan offer tax benefits of up to Rs.1.5 lakh under section 80(C) of the Income Tax Act. Also, the death benefit amount received by your loved ones is also exempt from tax under section 10(10)D, provided your annual premium is less than 10% of the sum assured.

Points To Consider Before Purchasing A Term Insurance

The above benefits might paint a nice picture of term insurance policies, promising high returns for low premium. However, there are a few points one should consider before going for a term insurance. 

Term insurance is not an investment. It does not give any maturity benefits, meaning, the sum assured is paid only upon the death of the policyholder during the term of the policy. In case of the policyholder surviving till the end of the policy term, he gets nothing. The paid premiums shall not be returned in any form. However, the amount of the premium paid is very less compared to the sum assured amount. If you look back at the previous illustration, the policyholder just paid a total premium of Rs.9,70,814 for a sum assured of Rs.54,17,000. 

The insurance companies are very stringent with its premium payment. Missing a single payment can result in the lapse of the policy and jeopardize all those premiums you paid till date. If you opt for a term insurance at an older age, you will not get to add additional benefit riders like critical illness. If you happen to be affected by any of the critical illnesses and are unable to pay your premium, you will lose significantly.

It does not have any surrender value. So, if you find yourself unable to pay the premiums after a period of time, you cannot surrender the policy to get any kind of surrender value. This is a drawback for many middle class families who have always perceived insurance policies as some kind of investment for future goals. 

It does not have the option to take a loan on the policy, like traditional life insurance policies. That is a dampener with the middle class population too. 

So, At What Age Should I Get My Term Insurance?

Once you have started earning a regular income, say in your late 20s. At this age, you have a steady income and have started making plans for your future family. You already have your parents as your dependants. You will soon be starting a family and adding members to your family. This is also the age you can be assured of an increasing income in the near future and can safely allot part of your income towards your term insurance plan. You are in the prime of your life and healthy, allowing you to take advantage of additional riders available with term insurance plans. 

End Note: A Term Insurance plan is the simplest form of insurance cover you can get to secure your family’s financial future in your absence. With high sum assured at low premiums there is no question on the necessity of a term plan, just the decision on how soon you need to start. Earlier the better if one wants to avail the benefits of a comprehensive coverage, tax savings and an economical investment for the future.