A life insurance policy brings a lot to the table. It offers security to your family in case of your demise and helps in the re-payment of any debts. However, it is often unclear when you should purchase a life insurance.
The optimal age of buying a life insurance policy is when you are young and when you have money to buy it. This is because as you get old, your premium amount increases. But the Gen Y or millennial population is now delaying investing in a life insurance policy due to the increasing accumulation of debt and less income to spare.
This delay in purchasing life insurance places a direct impact on the future savings of the individuals. Think of retirement savings – the more you delay, the fewer savings you have. Similarly, life insurance is beneficial when purchased at the right age. But what is this right age? Let’s find out.
As discussed above, a life insurance policy can prove very beneficial if you invest early. You can accumulate the bonus component over a long period and use it for various purposes. For instance, life insurance can help you pay the down payment on your house if you hold the policy for some time. You can even use this accumulated amount for your retirement.
This clearly indicates that you should get a life insurance policy as soon as you have the required money. Life insurance is necessary even when you do not have any liabilities and dependents.
Consider this scenario:
You are 20 years old, and you have no debts or liabilities. You are not married, and you don’t have dependents. However, you earn a handsome amount which is enough to fulfil your requirements. Hence, at this age, you will not be leaving behind any debts or loans. You can start your insurance journey by buying a term or endowment insurance plan.
Contrary to the above scenario, many experts also believe that parents should buy a life insurance policy for their infants. This seemingly foreign concept has a valid reason - when infants have life insurance that is paid for a long time, it makes for a great safety net in case of emergencies.
For example, when a person is 24 years old, and they want to start a business, this investment can offer the seed money to fund that idea. The idea is to secure not only the life of the individual but also their future.
It is even beneficial because, at this young age, the premium amount is lower, so it doesn’t put any burden on the parents.
Till now, we have discussed that purchasing the policy early on is beneficial. But why?
Let’s understand this with an example:
If you are 20 years old and you want to purchase a policy of INR 1 lakh base value, you need to pay the premium of around INR 700-800. But, when you are 30 years old, this premium will increase to INR 1200-1400.
Here’s another example:
| Age | Policy Cover | Premium |
|---|---|---|
| 25 | INR 50,00,000 | INR 4,000 |
| 35 | INR 50,00,000 | INR 6,500-INR 7,000 |
This is what Exide Life Insurance would offer you at different ages. If you take insurance at 25, you only have to pay INR 4,000 or slightly more/less than this. But, if you take an insurance policy at 35, you have to pay almost double the premium amount for the same insurance and same coverage. The cost of delaying life insurance for even ten years has a considerable impact on your premium and overall policy pay-out. This is because as we age, we are more susceptible to health issues. So, if you apply for life insurance late in life, it is highly likely that the provider will give you a very high premium. Sometimes, the provider may even decline your policy application if you have any health ailment at the time of applying for the policy.
Therefore, even if you don’t want to purchase life insurance early in life, like in the 20s, consider buying it before 30 or 40. This will only help you secure the future of your dependents and reduce their liabilities after you.
In the current era, college graduates and any millennial just joining the workforce have a certain amount of accumulated debt. For instance, a new employee will take a credit card to pay his bills and get through the month. Similarly, the millennial workforce has a lot of accumulated debt because we have a culture of purchase-first-pay-later. This leaves every individual with a certain amount of debt throughout life. Some take a home loan when they start working, and others take a car loan to make the commute easier. These millennials can take a term insurance policy to cover up this debt.
In the event of a sudden demise, the dependent or immediate family members of the individual have to repay the debt of this individual. From car loan to credit bills, everything becomes the responsibility of the immediate family. A life insurance policy can protect the individual’s family from their debts.
Further, if this policy has an investment pay-out, millennials can take out this money for any purpose in the future years.
Tax saving is significant because now we earn more and taxes are also more. Saving some amount of this tax is a priority to every millennial and working individual. Fortunately, the life insurance policy offers you tax benefit under section 80C. The premiums paid up to INR 1,50,000 can be claimed as exemption through Section 80C of Income Tax Act, 1961 and life insurance is one of the elements which come under this section.
Additionally, the pay-out that family members or nominees receive is also exempted from tax under section 10(10D) of the Income Tax Act, 1961.
We have already established that although taking life insurance at a young age is beneficial, it depends on personal preferences and the number of dependents. In this section, we will explore the tips which will help you buy the right policy according to your age.
If You Are in Your 20s
This is the best time to purchase life insurance. This is because our health history is best and you will probably take some loans in the future. In this case, you should keep the following tips in mind:
If You Are in Your 30s
A lot of people marry by the time they are 30. Hence, this is also a perfect time to purchase a term life insurance policy. Here are the things that you should consider:
If You Are in Your 40s
Some people purchase life insurance in their 40s. They may get a good deal if they have an excellent health history. If you are purchasing a policy at this age, consider the following factors:
If You Are in Your 50s and 60s
Buying life insurance at this age will not be easy. The premium will be more, and you won’t be able to take a policy term of more than 15 years. If you do, your premium will increase, or the provider may refuse the policy to you. Therefore, only purchase a policy at this age when you have too many pending bills and considerably low-income pay-out.
The advice regarding the best age to purchase life insurance is often contradictory. Some experts say that 25 - 35 is the best age to get insurance and others say that the best age is when you are an fairly young. In reality, the best age to get a life insurance policy depends on you. It should be according to your requirements, availability of money, and debt. So, consider your factors before purchasing a life insurance policy at any age.
