As you grow older, your responsibilities only increase. You will start working, get married, your parents will retire, you will have children - the grind just never ends and you will always have to be prepared for anything that comes your way. It is necessary to always have adequate financial resources to make sure that both you and the people dependent on you for their lifestyle and goals do not have to suffer in the face of any adversity. It is extremely, extremely important that you understand your obligations and chalk out a good financial plan.
One option that can help you a great deal is life insurance. You should explore the huge variety of plans available in the market. Each plan caters to different needs. For instance, an endowment plan helps you build wealth and also gives you insurance coverage. On the other hand, a retirement plan assists you in creating a happy and secure retirement life for yourself.
When you start looking at the various life insurance products in the market, you may wonder if you should buy them as soon as possible or wait for a while. What is the ideal time to buy life insurance? At what age should you buy it?
Let’s see - in the article below! ?
Before we begin, Let’s Understand What Life Insurance is.
Life is a contract between you and an insurance company that essentially covers your financial risks. You need to pay a fee (called the premium) in return. Life insurance’s primary objective is to provide financial protection for your loved ones if you pass away, unfortunately, during the policy period. Some life insurance plans also help you accrue long-term savings and achieve financial goals like retirement planning, a child’s education/wedding, etc.
What is the Right Age to Buy Life Insurance?
Some people believe that purchasing life insurance at a young age is the best option, while others believe that waiting until they are older is the best option. However, getting life insurance should be based on your goals and needs rather than your age.
So, the right age to buy life insurance will be determined by your goals. Let’s see how -
? If Your Goal Is Financial Protection For Dependents
If you are the sole breadwinner of your family and something unfortunate happens to you, who will look after the people who rely on your income? Losing a loved one is already a mentally stressful experience and facing financial hardship at such a hard time will only add to their distress. If you have dependent family members like retired parents, a non-working spouse, children, etc., you should consider purchasing term insurance as soon as possible. It doesn’t matter how old you are. The plan serves as a financial safety net for your loved ones, helping them cover outstanding debts, living expenses, and other financial obligations in your absence.
However, if you are single with no dependents, term life insurance may not actually be necessary for you.
For example, Rashi is a young professional who recently started her career as a software developer. She is the sole breadwinner of her family as her parents are retired and her younger brother is still studying. She purchases a term life insurance policy with a sum assured of Rs. 40 lakhs for a duration of 20 years. It will act as a financial safety net for her family if she passes away during the policy term and help them manage daily expenses, fund her brother’s higher studies, etc.
? If You Want To Accrue Wealth In The Long Run
If you are looking to create long-term wealth, a Unit Linked Insurance Plan (ULIP) can be an excellent investment option, especially if you start early. The plan gives you the opportunity to invest in the stock market and with a longer policy term, you can earn higher returns over time. Consistently investing in a ULIP over a number of years gives you the opportunity to build long-term wealth.
For example, Shekar is 25 years old and wants to accumulate wealth for his future milestones like travelling to Europe, building his dream home, etc. He invests in a ULIP and chooses a fund according to his risk appetite and financial goals. Since he has invested in the plan at a younger age, he has a higher probability of earning great returns. And, the plan will also provide him with insurance coverage, which will keep his loved ones financially secure if something happens to him when the plan is active.
? If You Have Specific Financial Milestones
Do you have specific financial objectives that you want to achieve, such as saving for retirement or purchasing a home? If so, an endowment plan can be the ideal option for you. This plan offers both life insurance coverage and a savings component, enabling you to save money over time to reach your financial objectives while also financially securing your loved ones. The best time to purchase an endowment plan is when you begin planning for your financial goals. The earlier you start, the better. You will possess more time to build your savings.
For example, Beena is a single mother with a 5-year-old child. She wants to save money for her child’s higher education, and so, she invests in an endowment plan with a cover amount of Rs 50 Lakhs and a policy term of 15 years. Her child will have access to the education she needs whether or not Beena is around - with the help of the endowment plan’s payout.
? If You Envision Recurring Financial Obligations
If you think you will need a secondary source of income or regular payouts in the future, a guaranteed income plan may be the right choice for you. It combines insurance coverage and periodic payouts that can be used for a variety of purposes, such as paying EMIs, rent, etc. You should purchase a guaranteed income plan when you start facing these regular financial obligations. With this plan, you can ensure that you have the necessary funds available to meet your recurring expenses, while simultaneously protecting your loved ones with a life insurance cover.
For example, Harish is a bank employee and is about to retire in a few years. He wants to invest in an insurance plan that provides him with a secondary source of income in the future for expenses like rent, utility bills, etc. Harish thus buys a guaranteed income plan for a duration of 10 years. Over time, he will receive payouts from his guaranteed income plan that will help him meet his recurring financial obligations.
Purchasing life insurance is an important life decision that requires careful consideration. When it comes to what age you should buy it at, you need to consider your financial goals, obligations, and dependents. The right time to purchase life insurance is when you are ready and have a clear understanding of what you hope to achieve with your policy.