When you are in your 20s, you would like to opt for investments that give you returns sometime in the future. Though life insurance is treated as another type of investment, not many consider it as fruitful as other options. But is it really helpful? So today let’s understand the different aspects of life insurance tbbhat every person in their 20s should know:
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Why Is Life Insurance Vital?
Life insurance provides a safety net for your family and also acts as a tool in fulfilling long-term financial goals. The basic type of insurance, which is term insurance, gives you a life cover. Your insurer credits a lump sum amount to your beneficiary in case you pass away during the policy term, as a death benefit. Financial goals like wealth creation can also be achieved by getting policies with maturity benefits or having provisions for regular payouts. It is not necessary to be married or have kids to consider getting a policy. The beneficiary could be your parents or anyone else.
Benefits of Buying Insurance
If you are in your 20s, having a career and a steady income must be the things that you want now. However, you would eventually marry and maybe have children as well. But if you are waiting for it to happen to consider getting an insurance policy, then you would have to settle for a hefty premium. The cost of premiums increases with age which is why getting one in your early 20s is ideal. Insurance also offers tax benefits that you can claim to lessen your taxable income. Along with this, you can buy riders in insurance to enhance your coverage and get additional perks.
What Type of Insurance Should You Opt For?
There are various types of life insurance policies available to suit your future plans. If you want a plain life cover, term insurance is it for you as this policy only provides a death benefit. But if you are seeking an insurance policy that can do both, grant a life cover and aid in wealth creation, then plans like endowment plan, Unit-Linked Insurance Plan (ULIP) and money-back insurance should be considered. However, if you have dependents that require financial assistance even after you retire, then you should opt for a whole life insurance policy. This type of plan covers you till you turn 99 years of age, safeguarding you even after retirement.
Tips for Buying an Insurance Policy
Here are some tips to help make your buying decision easier:
- Be honest with your insurance company agent: Let your agent know your habits of smoking or drinking alcohol if you do it. If your insurer is not aware of these things, your claim will be rejected in the future in case you die due to those reasons.
- Get a medical test done: Before you buy an insurance policy, you will have to undergo a medical test. If opt-out of it, then you will get lower coverage on your policy.
- Discuss the sum assured: Deciding the sum assured depends on how much your family would require to sustain alone. You have to share your future plans with the agent to come up with the amount of coverage needed.
- Check Claim Settlement Ratio (CSR): Before pinning down the insurer, you need to check the CSR of that company. A higher CSR tells you how reliable the insurer is and if they efficiently clear the claims filed by policyholders.
