7 Reasons to Get Insurance in Your 20s
As a 22-year old engineer Vikram spends long hours in front of the computer during the day and at night preparing for his entrance exams. Vikram’s life is far from easy. He often finds himself sleep deprived and is fast being pulled into a sedentary lifestyle. Not to mention, the unending worry about providing support to his ageing parents means he is under constant mental stress.
Vikram was already considering purchasing a health insurance plan at a later point in his life. However, on conducting some research, he found that the earlier he bought one, the better it would be for him!
Here’s why he believes that insurance is a great idea for individuals in their 20s:
- Affordable premium pates
- Higher coverage of medical policy
- Short waiting period
- No claim bonus accumulation
- Tax savings for individuals
- Support to ageing parents
- Future & family planning
- Affordable Premium Rates
Whenever an insurance company offers plans to a policy buyer, it assesses the level of risk involved. Based on certain factors like age, medical history, type of coverage/ diseases required in the plan, tenure, etc., companies decide an appropriate premium cost.
As it happens, when an individual is young, they are likely to be at a lower risk of contracting severe illnesses or requiring expensive medical treatments. This means a lower cost of premium as compared to an older person.
For 22-year old Vikram, this is a huge advantage!
- Higher Coverage of Medical policy
As we age, our options of insurance plans reduce as we may become prone to ailments and health risks. But since Vikram is a young and healthy individual, insurance companies will offer him a range of plans to choose from. He can then conveniently pick a plan packing a lower level of risk while still benefiting from substantial coverage.
The bottom line is that, to reap maximum benefits of wider coverage, starting young is the key. The earlier you start, the more economical and smarter it is.
- Waiting period can turn into an advantage
Waiting periods are a fundamental part of insurance policies. It simply means that in case of pre-existing diseases, one may have to wait until a certain stipulated period to make any claim. These periods usually differ from one disease to another and is specifically included in the terms and conditions of the policy.
In case of several severe ailments, the waiting period could range from 1 year to 4 years.
However, young individuals may not even require these treatments. One could then take full benefit of the policy without having to wait for coverage
- No claim Bonus gets accumulated
Insurance companies offer benefits to policyholders in the years they do not make any claims. More often than not, there is a benefit to renewing the sum assured to a higher limit. Over a period of time, no-claim bonus gets accumulated and when you look back, there is a significant increase in the sum assured
Vikram estimated that he could accumulate plenty of no-claim bonus as he’s currently less likely to make frequent claims. There would be no corresponding increase in the premium amount as well. In fact, some insurers offer discounts on the premium cost during no-claim years.
- Tax deductions can be claimed
Under section 80D of the Income Tax Act, 1961, an individual can claim tax benefits on the yearly premium amount paid. Like any other young professional, Vikram is also huge on accumulating savings by investing his earnings in tax-saving instruments. So, there’s another win!
However, it is crucial to realise that a policy should not be taken only with the sole aim of claiming tax benefits. The coverage that it could provide during unexpected emergencies is far bigger than any other benefit.
Here are some points to remember:
- Deductions are offered on policies covering self, spouse, children if the premium paid is not cash.
- It also includes non-senior and senior citizens’ parents.
- Each individual or member of a HUF gets the benefit tax deduction.
- Health insurance premium is eligible for tax exemption under Section 80D of the Income Tax Act up to Rs. 25,000 for regular insured and to Rs.50,000 for senior citizens. Gross benefits can go up to Rs.100,000 for a family.
- Support to Ageing Parents:
It’s possible that you have student or home loans in your name. If tomorrow you were to meet with an unfortunate incident, the burden to pay off the remainder of your debt would fall on your family.
Having a medical cover helps to be relieved of such expenses. Vikram’s family happens to be dependent on his source of income. So, for someone like him, it is all the more necessary to buy a health insurance plan.
- Planning for the future family
Financial experts highly recommend millennials like Vikram to opt for a term life policy.
However, here are some things you should have a thorough understanding of before buying life policy:
- Life insurance is pricier than term policies but as time passes by, cash value increases and grows tax-free.
- You have the option to borrow against that accumulated cash value.
- It has a relatively low risk and acts as a savings too. Generally, an individual would take years to accumulate and save this kind of cash savings.
- If you happen to start a family soon, then the policy could also provide for the little one’s medical expenses if we customise the plan accordingly
- When Vikram is married and has children, he can dip into savings to bear his children’s higher education expenses.
Now that we have understood the importance and key driving factors behind insurance covers, we must consider opting for an insurance policy on the basis of our needs and requirements. So, what are you waiting for? Go on and get in touch with the insurance provider companies so your future safety doesn’t take a backseat! Above all, the earlier you start, the better it is.