Categorized | Term Insurance

Term Plan: Buying early gives you the benefit of lower premiums

We all know it is essential to buy Term plan. But it is not just a matter of buying – it is also that of deciding what the best time is to buy one considering the costs and benefits involved. Is it too early or too late to buy? Would I be saving more or less if I decide to postpone my decision?

Here is a briefing on timing to buy term insurance, in consideration of factors such as cost, inflation, risk, and of course, tax benefit.

  • Does insurance cost more with time? There can be no standard way of telling how much your Premium would be when you decide to purchase. However, you could be sure of the fact that the later you buy, the more costly it would be. And the reasons have definitely to do with Inflation and risks.

  • What role does inflation play? In simple terms, you could expect the rupee to lose its value with time, irrespective of how much it pares against the dollar. An ounce of product A would cost more ten years down the line in all likelihood, than what it costs now. Of course, you could expect your salary to rise as well – unfortunately, while there is no sure way of knowing what your salary would be in the future, you could vouch for the fact that costs would have rocketed up. If you could find a way for your salary to match the rising costs, count yourself lucky.

  • What are the risks involved? If you buy Term Insurance early in your career, you would be in the low-risk bracket, and would hence have lesser premium to pay. To the contrary, if you were to find yourself in the high-risk group because of time and age, and if you decided one fine day to buy insurance, you could be sure that the insurance companies would welcome you, but only with a higher price tag.

  • So, what about tax benefits? Your savings on your term plan would come from lower costs associated with premiums, as well as lower taxes that you pay on account of provisions associated with income tax. Considering that money is only likely to lose its value with time, money saved today means much more than money that you would save later. And you may as well want to make use of legal provisions today, than speculate on what they could be years later when you make a buying decision.

So, if you are looking for tax benefits through term insurance, now is the time.