A question that often comes to our minds is, what is the right age to buy a life insurance plan? For example, your friend might have a life insurance policy at 22, and you might think about buying one at 47. Although there is no specific timeline to buying a life insurance plan, holding one has multiple benefits. The time of buying the plan is solely dependent on your financial and investment choices and decisions.
But knowing the effect of age on your term insurance premiums as well as the life insurance premiums that you are going to pay is important.
What is Premium?
A life insurance policy premium is the amount that you pay to a life insurance corp so that you can keep your life insurance coverage active. In pure life insurance plans such as term insurance, the premium goes towards the provision of life cover, whereas in insurance policies like ULIPs, a part of the premium is invested while the remaining goes into providing the life insurance cover.
These life insurance premiums need to be paid at regular intervals. If you fail to pay the premium, the policy can lapse. But, you can decide the premium payment frequency and tenure as per your preference. For example, with a Tata AIA savings plan, you can choose a one-time premium payment, limited premium payment option, or regular premium payment option.
There are many factors that have an effect on the amount of premium that you pay. These factors include your medical history. For example, if you are prone to critical illnesses, you might have to pay a higher premium. Also, your alcohol consumption, as well as smoking habits, also might have an effect on your premium.
And lastly, your age plays a crucial role in deciding the amount of premium that you will pay for a savings plan or any other type of life insurance policy.
How Does Age Affect Life Insurance Premiums?
If you are looking for the lowest life insurance premiums, then it is advisable to buy a life insurance plan when you are young and in the pink of your health. This is because when you are at a young age, you are considered to be relatively healthier. This means that you are less likely to get affected by serious illnesses, which means the chances of mortality are reduced. Thus, this reduces the risk to the insurer, which in turn, reduces the premium that you pay for a life insurance policy.
When you are young, you do not have many responsibilities, and you can choose a cover according to your age. But, as you age, your responsibilities tend to increase, and you have financial obligations like liabilities, debts, etc. This means that you will have to get a life insurance plan with higher coverage. A higher amount of coverage means an increased amount of premiums.
Also, when you buy a life insurance plan early, you can save a large amount of taxes. With a life insurance policy, you can get a deduction of ₹1.5 lakhs on the premium that you pay towards the policy as stated u/s 80C of the Income Tax Act. Also, any money received as a death benefit or at maturity is exempted from taxes as stated in u/s 10(10D).
Also, you can opt for riders with your policy so that you can enhance the coverage offered by the policy. These riders include critical illness and terminal illness riders, death and dismemberment rider, etc. Depending upon your financial goals, you can choose a suitable coverage amount and the tenure of the policy.
There are different plans that you can buy when it comes to life insurance. If you choose a savings plan at an early age, you can collect a large corpus and also get life insurance coverage. Buying a life insurance plan in your 20s will be beneficial as you will have to shell out lesser premiums. But, you must also remember that the life insurance policy premium is dependent upon other factors also. So, always be careful while reading the fine print, act wisely, and buy early!