Life insurance planning for your 20s
Looking at the need for buying life insurance in your 20s, and how it benefits your financial life.
Life insurance is an essential arsenal in your investment planning for the future. However, most 20-somethings balk at buying insurance, thinking that they are young and healthy and they do not need it. However, it is meant to cover a future financial need and not a present one.
We present a few important reasons why life insurance for young professionals is most important:
* To protect your family against the loss of your income.
The most important benefit of taking life insurance for young professionals, is that the policy corpus may replace the income lost in case you are unfortunately absent in the future, or if a disability prevents you from working full/part time. The family needs to meet its daily expenses and also scout for an alternative source of income. Till your loved ones get back on their feet again, the life insurance money can keep the household steady.
* To get lower premiums instead of waiting to buy insurance in your 30s.
As a 20-something professional, you might currently be single and childless, but you might not be so a few years later. You may get married and start a family of your own – and life insurance will form a large part of your investment planning at that time. However, it makes more sense to invest in life insurance for young professionals when you are in your 20s rather than wait to do it in your 30s – the premiums are higher for those over 30 years of age. Insurance providers are happy to extend life insurance to healthy, non-smoking persons in their 20s, who have a stable income.
* To pay off unpaid liabilities.
The life insurance money comes in handy for one of the most important purposes: paying off debt. You may have invested in a house for the future, and chances are you took a home loan to fund the purchase. You may also have smaller loans (personal/car loans, for example). The loans are repaid via monthly instalments from your bank account. But if you were absent in the future, creditors will come calling on your family. Your loved ones would have to sell of their assets to repay the loans – but the insurance money can help with the repayment without compromising the family’s security in any way.
* To get tax benefits on the premiums paid.
Another great benefit of life insurance for young professionals is that it helps in tax planning. You can claim tax benefits up to Rs 1,50,000 on the insurance premiums paid, per year, under Sec 80C of the Income Tax Act, 1961. This is good savings for you. Thus, taking life insurance helps both investment planning as well as tax planning.
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