You really don’t have to do anything or be prepared for the happy surprises in your life. But, what about the unhappy ones? Such as a permanent disability or death? It is of the utmost importance that your family continues to meet its financial requirements even after you are not around. To secure your family’s future, you need to have term insurance.
There are many term plans such as the ones from ICICI Prudential, which you may want to consider buying. But the question is at what age? 27 years? 35 years? 42 years? While the investors and insurance experts have their own viewpoints regarding the right age, what really matters is the right life stage of the life when you would want to buy a term insurance plan.
We will discuss various factors that should help you to decide when is the right time to take a term insurance plan.
The earlier you take a term insurance plan, better it is. The first reason being that younger the policy holder, lower the premium. This means that for a cover of say one crore, a person who starts early would pay lesser than a person who starts later and so on. Insurance companies see better prospects in a young policy holder paying all premium instalments since he has most productive years ahead in terms of earning capacity.
Secondly, you have lesser financial liabilities when you are younger, in terms of loans and other debts.
So, more your delay buying term insurance, more premium you have to pay and higher cover you have to look for. Let’s take an example for males aged 30 and 45 years, assuming that they both don’t consume tobacco.
|Male X||Male Y|
|Age||30 years||45 years|
|Sum Assured Required (Rs)||1.10 crores||1.10 crores|
|Yearly Premium to be Paid (Rs)||11,990||32,890|
(Source: ICICI Prudential Term Plan Calculator)
So, as you can see, Male Y has to pay 3 times more premium than Male X against the same amount of sum assured. If Male Y had taken insurance at the age of 30 years, he would saved Rs20,900 annually till the time he reached the age of 45 years. This annual savings could have been invested in other financial instruments for further returns and tax benefits.
When dependency increases
What you must also know is that a term insurance plan covers you for a definite period starting from the date you purchase the plan. If you expect that you would have dependants beyond the age that is being covered by the option you are looking at, then a longer cover would be necessary. Experts resonate that anytime afterthe age of 65, your children would be independent and you would have saved enough for your spouse in form of sustainable assets. Also a longer cover increases the amount of premium, so does delaying the purchase.
When you are at the peak of health
This statement definitely holds good for an insurance plan. If you are in a good health with no major ailments afflicting you, the premium is low and companies are more than willing to cover you. This makes for another strong point in favour of buying a policy as soon as you can. A common condition like diabetes or high blood pressure can push up your premium amount to a large extent making your policy an expensive affair.
All the factors discussed above very clearly turn the tide in favour of buying a term insurancepolicy as soon as you can.However, having said that it doesn’t mean that you can’t buy term insurance in 40s. You can, the only thing is that you would need to apply for a greater life cover at higher premium. Hence, sooner the better for your peace of mind.