Early to bed and early to rise makes a man healthy, wealthy and wise…. We all know this and the same is true when one plans to buy a life insurance. Obviously there are advantages of starting early as insurance plans tend to be cheaper at a young age. But Insurance is probably the last thing on one’s mind at this age.There is a misconception among youngsters that life insurance is something that one needs when he or she gets old or crosses a certain age and income level.
Term Insurance at 20s
One should ideally purchase a term insurance plan in 20s as:
- Premium will be much lower
- High disposable income and less liabilities – no dependents like spouse or children, other expenses like home loan or child education or parents’ health, etc.
- Healthier so easy to get more coverage at less cost, and in some cases without health checks
- Longer duration of coverage (up to the age of 70 or 75 years) at the same cost
Let’s understand this better with the help of the illustration below:
Say you purchase a term insurance at 25 years, the maximum coverage will be upto 75 years and the premium paying term will be 50 years. So the total premium that will be paid will amount to INR 2,50,000 (INR 5000X 50), considering you purchase a cover of INR 1 crore.
On the other hand, if you purchase a term insurance at 40 years, the total premium will amount to INR 7,50,000 (INR 25000 X 35), assuming a maximum term of 35 years, and cover of INR 1 crore.
One can save approximately 5 lakhs, by starting early.
|
|
Scenario 1 – Starting Early |
Scenario 2 – Starting Late |
|
Age |
25 |
40 |
|
Maximum Tenure |
50 years |
35 years |
|
Sum Assured |
1 crore |
1 crore |
|
Average Annual Premium |
INR 5000+ |
INR 25000+ |
|
Total Premium Paid |
INR 2,50,000 |
INR 7,50,000 |
Health Insurance at 20s
Similarly, health insurance premium is also low when one starts early and much costlier once you cross 40. Moreover, no medical tests are required at this age. Health insurance companies typically follow a waiting period of 3-4 years to cover any pre-existing diseases. Ideally this period should be crossed when you are young and healthy. Delaying your decision to purchase a health cover might result in any unfavorable medical conditions later, and this will have implications on the health insurance cover.
On the whole, the benefits of buying health insurance early are:
- Low premium
- Easier to cross the pre-existing diseases clause – as one is healthier at this age
- Earn no-claim bonuses and other accrual benefits on the policy
- Possible to extend policy to cover family members like spouse, and children
Normally, one thinks that the group health plan provided by the exiting employers will be sufficient. We, however, suggest purchase of an individual health insurance policy, in addition to the group health cover provided by your employer. Group health plans are useful, but the extent of coverage is usually linked to your designation in the organization, and it lasts only till you are employed with the company. It doesn’t cover all your medical needs, and will not provide any coverage if you resign or if you are between jobs.
It is highly recommended to take the leap when you are young. It may seem a costly proposition at a young age, but this will turn out to be the most rewarding investment for you and your loved ones at a later stage. The right time to buy an insurance is when you start your first job, and not to defer until you reach a certain level in your career ladder or your age graph. The benefits of starting at the right age (=right time) will outweigh any costs considerations that you may have in mind. The mantra is ‘start early and live free’
