Three Reasons to Buy Life Insurance During Your 20s

Life is unpredictable. Be grateful for every moment

While a lot of us struggle to understand the aspect of being grateful towards life, most of us would agree to the randomness of it. Life keeps throwing lemons at us and we should be prepared to face all eventualities of it.

However, what is the best way to do so? Insurance…. may be?

Well, if you are thinking on those lines, you are definitely right.

Opting for an insurance, especially when you are young is one of the best decisions that you can take. But, whenever we think of life insurance, the first image that comes to mind is probably that of an elderly couple playing with their grandchildren. Sadly, we are often misled by the thought that life insurance is meant for old people and may consider investing in one only after crossing forty or so.

In fact, in most cases, people in their 20s do not even think of buying a life insurance policy.

Why then, is it said, that an investment in life insurance while in your twenties is much more beneficial than one when you are in say, your fifties?

“Buying life insurance in the early years of one’s life is always a good idea. Usually, the younger you are, the healthier you are and so insurance companies can give you better price for a higher life cover which also gets locked for you for as long as you continue with the policy.”

“A person today who is 25 or even a 30-year-old is well versed with their labilities and understand the need to secure themselves financially, milestones in a young person’s life like the first job or the first car, getting married or even buying first house trigger the need for buying life insurance, as it will definitely help the individual gear towards accumulating wealth for the future,” said Mandeep Singh Gulati, DVP, marketing at Aegon Life Insurance. 

1.    Substantially lower premium amounts

One of the biggest benefits of applying for a life-insurance in your 20s is, you get to pay substantially lower premium amounts. This is because, the younger you are, the healthier you are; since chances of falling ill are considerably low, insurance companies end up charging much less premiums.

In life insurance policies, the premium rates are linked to age. However, there is a cost of postponement. For example, if you are a 24 years-old, you will have to pay around Rs 7,000 per year for 30 years. The sum assured will be Rs 1 Crore.

The same premium amount will be Rs 9,000 per year if you purchase a policy at the age of 30. You say it's only Rs 2,000 more but if we calculate the total amount, it will be Rs 7,20,000 extra in comparison to if you have bought it at 24 years of age. The reason behind the low amount of premium is the fitness and health of the young people which lowers the risk of death.

2.    Acquire more loyalty benefits and avail policy loans

Other major benefits of opting for a life insurance policy at a young age is that, as a policy holder you end up acquiring more loyalty points and also avail policy loans. Several insurance providers give competitive offers to policyholders. In these offers, either premiums get reduced or the policy coverage modifies conditional to the loyalty of the customer with that particular insurance provider. Hence, if insured at 20, by the time one reaches 50, she would have a much better beneficial cover than someone who invests in a life insurance policy at 45 or 50.

Alternately, once you also avail the benefit of policy loans as well. When you are young, there are often bigger investments to make in terms of education and also in our personal lives. Therefore, having a certain amount of cash value incorporated in our life-insurance account, will allow us to access a part of this cash value in the form of policy loans if required.

3.    Avail tax benefits

Last but not the least, yet another benefit of opting for a life insurance at a young age happens to be tax benefits. One can avail tax benefits in the form of 80C deduction, which helps reduce your taxability you end up paying your own life insurance. This matters even more when you have a lower pay package and cannot afford to lose any of it in taxation. At such a time, even the merest amounts of tax deductions are extremely beneficial and important.

However healthy one may be, life insurance is an absolute necessity for everyone, whether young or old. As human beings we might not have complete control over life’s unpredictable nature. But as the childhood story of the ant and grasshopper, we must keep ourselves prepared for the winters of life and when any uncalled for calamity strikes, we are able to sail through it.