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Term Life Insurance for Young Adults in India

Young adults often don’t think about long-term planning because they are usually healthy. However, with changing times and more health issues, it’s important for everyone to protect themselves and their families with term life insurance as it provides financial security in case of their untimely demise. That’s why having a term plan is essential today.

Why is it Important for Young Adults to Buy a Term Insurance?

Term insurance is crucial for young adults today for several reasons:

Rising Health Issues

Poor health is no longer just a concern for the elderly. Nowadays, even young people and children face serious medical problems. This makes it important to secure yourself and your family financially.

Term insurance ensures that if something happens to you, your family will have a significant amount of money to rely on. You can also add a critical illness cover to help with the costs of serious illnesses.

Outstanding Loans

If you have loans for things like a house or a car, you need a financial backup in case you can’t repay them. Situations like permanent disability or long-term illnesses can affect your ability to earn. Term insurance can support you and your family in these scenarios.

Security for Life

In the event of an unfortunate incident, a term plan can protect the future of your dependents. The money from a term insurance policy can be used for your children’s education or your spouse’s daily needs, helping them maintain their standard of living.

Understanding Term Insurance Scenarios with Illustration

Rohan, a 28-year-old software engineer in Bengaluru. Like many young adults, he rarely thought about long-term financial planning. However, a conversation with his friend Priya, who worked in healthcare, changed his perspective. Priya shared stories of young people facing unexpected health issues, emphasizing the importance of being prepared.

Rohan recalled his 30-year-old cousin's struggle with a severe illness and the overwhelming medical expenses. He realized that poor health wasn't just a concern for the elderly. Additionally, Rohan had recently taken a loan to buy his dream car and worried about his family's ability to repay it if something happened to him.

After much thought, Rohan decided to purchase a term insurance policy online. He opted for a ₹1 crore term insurance plan to ensure his family would be well-protected. The process was easy and convenient. He compared different policies, chose one that suited his needs, and added a critical illness cover for extra protection.

With his term insurance policy in place, Rohan felt a sense of relief. He knew that if anything happened to him, his family would be financially secure. The policy would cover his outstanding loans, provide for his parents, and ensure his future children's education.

Disclaimer: The above illustration is a hypothetical example created for educational purposes only and does not represent a real-life scenario. Please read your policy documents to understand the terms and conditions clearly.

How Does Term Insurance for Young People Work?

Term insurance is a straightforward and affordable type of life insurance designed to provide financial protection for a specific period. Here’s a simple breakdown of how it works:

Choosing the Policy

You select a term insurance policy based on your needs. This includes deciding the sum assured and the duration of the policy (term), which can range from 5 to 40 years or more.

Paying Premiums

You pay regular premiums (monthly, quarterly, or annually) to keep the policy active. The premium amount is determined by factors such as your age, health, lifestyle, and the coverage amount.

Coverage Period

During the policy term, if you pass away, the insurance company pays the sum assured to your beneficiaries. This payout helps them manage financial obligations like loans, daily expenses, and future needs.

No Payout if You Survive

If you outlive the policy term, the coverage ends, and no payout is made. Term insurance does not have a savings or investment component, so there is no maturity benefit.

Optional Riders

You can enhance your policy with riders, such as critical illness cover, accidental death benefit, or waiver of premium. These add-ons provide additional protection and benefits in specific situations.

Claim Process

In the unfortunate event of your death, your beneficiaries need to file a claim with the insurance company. They must submit necessary documents, such as the death certificate and policy details. Once the claim is verified, the insurer disburses the sum assured.

Why Should You Buy Term Life Insurance at a Young Age?

Here are other reasons you should buy the best term life insurance for young adults.

Get Lower Premiums

Term insurance premiums are significantly lower for people in their 20s or early 30s as youngsters have a lower risk of developing chronic health issues, leading to lower premiums. Also, buying term life insurance at a later stage in your life can increase premiums by 50-100%, especially if you happen to develop a lifestyle disease or any other illness.

Reduce Chances of Rejection

It is better to purchase a term life insurance policy when you're young and healthy. Young adults usually suffer from fewer medical issues, making it less likely that their term life insurance application will be rejected. However, if you have pre-existing medical conditions, insurers may still deny coverage or charge a very high premium.

Stay Financially Secured

As a young adult, you may have financial responsibilities such as outstanding education loans or other expenses if you have dependents. So, in case of policyholder’s untimely demise while the policy is still active, your term insurance can provide financial security to your loved ones and ensure that they can continue to meet their financial obligations.

Benefit from Flexible Plans

Term insurance plans come with different riders or add-ons that you can purchase with your policy as per your needs, by paying a nominal additional premium, to enhance the coverage and get better benefits. Thus, youngsters can choose to add these riders at important milestones in their lives like marriage and childbirth, as per their changing needs.

Save Tax

You can avail tax benefits under Section 80C, Section 80D, and Section 10(10D) of the Income Tax Act, 1961. So, investing in the best life insurance policy for 18-year-old, when you're still young can help you save more money on taxes as you age.

Get Longer Coverage

Buying term insurance at a young age provides you with coverage at an affordable premium rate for a long-term. This way you also ensure the financial future of your family remains secured by paying a nominal premium to the insurer as compared to if you buy a policy in your 30s.

Benefit of Optional Riders

Starting early allows you to add riders, such as critical illness cover or accidental death benefit, to your policy. These add-ons provide extra protection and can be more affordable when purchased at a younger age.

So, all in all, buying term life insurance for young adults provides you with peace of mind knowing that your loved ones will be financially all right in case of your untimely demise.

What to Ask Yourself Before Buying Term Life Insurance?

As a person in your 20s, you might be tight on budget and may tend to buy insurance policies based on your current financial situation, which is not a good decision.

So, what should you ask yourself before buying the best term insurance policy for young adults?

Here are few questions to ponder upon:

1. What are my future goals?

Chart out a rough plan of how you want your future to look like - if you want to study further and want a loan or if you want to get married and have kids.
These goals will determine the type of term insurance policy and riders that will help your family go through financial turmoil in case of an unexpected event.

2. What are my liabilities?

Always consider your current or future liabilities like outstanding loans, or if you intend to take a loan in the future before you purchase a term policy at a young age.
Make sure your insurance covers your financial liabilities to avoid burdening your family with EMI repayments.

3. Do I have dependents? How many?

Consider the number of dependents you have and plan for their needs in the future.
Ask yourself - Do you have aging parents with medical conditions? A spouse who may not have a fixed source of income? Will you have children in the future?
These factors will determine the coverage amount required to provide your family with a comfortable life in your absence.

4. What health issues do I suffer from?

Include your health issues, if any, in your term insurance plan.
This will determine your premium and allow you to opt for relevant riders to get enhanced coverage and financial protection.

5. Can I afford the premiums?

Ensure that the premiums fit within your budget without compromising your current financial stability.
Remember, it’s important to maintain the policy over the long term.

6. Do I need any riders?

Evaluate if you need additional coverage options, such as critical illness cover, accidental death benefit, or waiver of premium.
These riders can provide extra protection tailored to your specific needs.

How Young Adults Should Choose the Right Term Life Insurance Plan?

In today’s hectic work life, there is a constant struggle to maintain work-life balance, with health taking the back seat. Thus, the youth are increasingly falling victims to lifestyle diseases these days. In such a case it is important to buy the best term life insurance policy at a young age. Here’s how to choose one:

Coverage Amount

Check the coverage amount of the term life insurance policy and if it is sufficient to meet the financial needs of your family in case of your (policyholder's) untimely demise. As young adults, this should be decided based on your current and future financial obligations.

Premiums

Compare the premiums of different types of term insurance policies offered by different insurance companies to land at the best term life insurance for young adults with lower premiums. However, don’t only be blinded by low premiums; choose the one that offers the best value for money.

Policy Term

Compare the premiums of different types of term insurance policies offered by various insurance companies to find the best term life insurance for young adults with lower premiums. However, don’t be blinded by low premiums; choose the best value for money. You can use a term insurance calculator to evaluate the costs and benefits of each policy to make a smart choice.

Premium Payment Frequency

The premium can be paid monthly, quarterly, half-yearly, or annually. So, young adults can choose any of the premium payment frequency based on their financial goals and budget.

Riders

Look for term insurance policies that come with riders at affordable extra premiums. Make sure that the policy you choose offers riders that satisfy your specific needs and provide necessary coverage.

Claim Settlement Ratio

Buy a term life insurance policy from an insurance company with a high claim settlement ratio to ensure that your family receives the death benefit quickly and hassle-free, in case of an unfortunate event.

Which Term Insurance Riders are Important for Young Adults?

You can buy term insurance riders for an extra cost. These riders let you customize your policy to fit your specific needs.

1. Accidental Death Benefit (ADB)

If the policyholder dies in an accident during the policy term, the nominee gets an extra payout in addition to the sum assured.

2. Accidental Total Permanent Disability Benefit (ATPD)

If the policyholder becomes permanently disabled due to an accident, all future premiums are waived, and the policy continues as normal or gets a lump sum payout to cover financial needs.

3. Critical Illness

If the policyholder is diagnosed with one of the critical illnesses mentioned in the policy documnet, after a waiting period, all future premiums are waived, and the policyholder gets a lump sum payout to help with medical costs.

4. Terminal Illness

If the policyholder is diagnosed with a terminal illness, they receive the full sum assured (up to 2 crores) in advance. If the sum assured is more than 2 crores, the excess amount is paid to the nominee after the policyholder’s death.

How to Buy a Term Plan Online?

Here is how you can buy the Young Term Plan from the comfort of your home through online way:

Step 1

Analyse and compare term plans which suits best according to your need and budget.

Step 2

Consider factors like the sum assured, policy term, and any additional riders.

Step 3

Complete the online application form with your personal and medical details.

Step 4

Submit the required documents, such as identity proof, address proof, and income proof.

Step 5

Pay the premium online. Once confirmed, you will receive a policy document via email.

Understanding Terminologies of Term Insurance

Paid-up Benefit

This benefit is available under certain life insurance plans with a return of premium option. If the policyholder fails to pay the premium within the grace period after the first two policy years, the policy will convert into a paid-up policy. Once converted, the insurer will pay the applicable death benefit if the policyholder passes away during the policy term.

Policy Revival

You can revive a lapsed or paid-up term insurance plan within five years from the first unpaid premium. To do so, you will need to pay all outstanding premiums along with any applicable interest. The insurer may also require a new medical examination.

Surrender Value

If you decide to surrender the policy, the insurer will not pay back the premium paid to the policyholder. As term insurance is designed to provide a death benefit to your beneficiaries if you pass away during the policy term, it doesn't accumulate cash value.

Grace Period

The insurer provides a grace period for premium payments: 30 days for quarterly, annual, and semi-annual payment terms, and 15 days for monthly payments.

Free Look Period

You have a free look period of 30 days to review the policy purchased and cancel if you are not satisfied.

Exclusions of Term Life Insurance

Suicide Clause

If the policyholder commits suicide within the first 12 months of buying or renewing the policy, the insurer will not pay the death benefit. Instead, they may refund the premiums paid up to that point.

Accidental Death and Disability Exclusions

The accidental death or total permanent disability benefit will not be paid if the policyholder had pre-existing conditions, was involved in criminal activities, self-harm, suicide, military actions, riots, wars, or was under the influence of drugs.

Critical Illness Exclusions

The critical illness benefit will not be paid if the illness is due to war, riots, rebellions, alcohol or drug influence, or involvement in unlawful activities.

Term Insurance Tax Benefits for Young Adults

Term insurance offers several tax benefits for young adults in India. Here are the key benefits:

Section 80C

Premiums paid for term insurance are eligible for tax deductions up to ₹1.5 lakhs per annum under Section 80C of the Income Tax Act, 1961. This benefit can be availed by the policyholder, their spouse, and dependent children.

Section 10(10D)

The death benefit received by the nominee is tax-free under Section 10(10D) of the Income Tax Act, provided the premium does not exceed 10% of the sum assured.

Section 80D

If the term insurance plan includes a health insurance rider, such as critical illness cover, the premium paid for this rider is eligible for an additional deduction under Section 80D.

These tax benefits make term insurance a financially savvy choice for young adults looking to secure their future while also saving on taxes.

Think of term insurance as a safety net that not only protects you but also helps you achieve your dreams. For just the price of a few coffees each month, you can secure your loved ones’ future, ensuring they can continue their lifestyle and reach their goals, even if you’re not the

With options like critical illness riders and accidental death riders, term insurance is more than just a policy, it’s a promise of stability and peace of mind. Start early, lock in low premiums, and see how this small step today can lead to a worry-free tomorrow.

FAQs about Term Insurance for Young Professionals

What is the minimum age for term insurance in India?

The minimum age at which you can buy a term insurance plan for yourself in India is 18 years.

Are riders available with term life insurance for young adults?

Yes, by paying an extra premium, you can various term riders based on your needs, like Critical Illness, Accidental Death cover etc., with term life insurance for young adults.

What is the best age to buy term insurance?

Typically, people should buy term insurance while still in their 20s, as it is the age when most people start earning, have relatively few expenses, are healthier, and can get policy at lower premiums.

Who should young adults nominate as the beneficiary of the term life insurance policy?

You can nominate anyone as the beneficiary of the term life insurance policy. However, you must keep the nominee updated in case of any personal changes such as marriage, divorce, or birth of a child.

Can a 22-year-old switch to a different term life insurance policy in the future?

Yes, young adults can switch to a different term life insurance policy after they have compared the policies and if they feel the new policy will provide better coverage and benefits. However, they need to follow certain rules and regulations to make such a type of transfer possible.

Why should young adults consider buying term insurance?

Term insurance is affordable and provides financial security to dependents in case of an untimely death, ensuring that any financial obligations (like loans or mortgages) are covered.

What is the ideal term length for a term insurance policy?

The ideal term length depends on individual financial goals, but most young adults opt for terms that cover major financial responsibilities like home loans or children’s education, which can range from 20-30 years.

How much coverage should a young adult opt for?

A general rule is to select coverage that is 10 to 15 times your annual income. This ensures that your family is financially protected for an extended period in your absence.

How does the policy lapse affect a young adult’s term insurance?

If a young adult fails to pay the premiums, the policy may lapse, leading to a loss of coverage. Most insurers allow a grace period or offer policy revival options within a certain timeframe, though this may involve paying missed premiums and interest.

What is the tax benefit associated with term insurance for young adults?

Premiums paid for term insurance are eligible for tax deductions under Section 80C of the Income Tax Act, up to a certain limit. Additionally, the death benefit received by beneficiaries is generally tax-free under Section 10(10D).

How does opting for a term insurance plan with return of premium (ROP) impact young adults?

Term insurance with a return of premium ensures that if the policyholder outlives the term, the premiums paid are returned. However, the premiums for ROP plans are significantly higher than traditional term plans, which might reduce affordability for young adults.

What is the difference between single-pay, limited-pay, and regular-pay term insurance, and which is best for young adults?

Single pay: Pay the entire premium upfront.
Limited pay: Pay premiums for a shorter period, but coverage lasts the full term.
Regular pay: Pay premiums throughout the policy term.

Regular pay is often more affordable for young adults, but limited pay may be attractive for those who prefer to complete payments early.

How does term insurance work if a young adult takes it in multiple countries (for those working or studying abroad)?

Some insurers offer global coverage, while others may limit coverage based on residency or nationality. If a young adult is planning to live or work abroad, it's crucial to check whether the term insurance plan covers death occurring outside the policyholder’s home country.

Is it possible for young adults to increase the term insurance cover without buying a new policy?

Some policies offer the option to increase coverage at key life stages (such as marriage, the birth of a child, or buying a house) without the need for medical re-evaluation. This feature is especially beneficial for young adults anticipating future financial responsibilities.

What is the difference between term insurance and group term insurance?

Group term insurance is often offered through employers and provides coverage as part of a collective policy. However, it may not offer sufficient coverage or remain active if the policyholder changes jobs. For young adults, an individual term insurance policy may offer more flexibility and sufficient coverage.

How does debt impact the decision of term insurance coverage for young adults?

For young adults with significant debt (e.g., student loans, car loans, or home mortgages), it’s crucial to choose a policy that ensures the debt doesn’t become a burden on loved ones in case of an untimely death. They should choose coverage that adequately covers their outstanding liabilities.

What is the impact of participating or non-participating term insurance policies for young adults?

Participating policies offer dividends or bonuses, while non-participating policies do not. Term insurance is typically non-participating, which keeps premiums lower, making it suitable for young adults seeking simple life coverage without investment components.

How affordable is term insurance for young adults?

Term insurance is relatively affordable for young adults because premiums are lower when purchased at a younger age. The earlier you start, the cheaper the premiums.

What are the benefits of term insurance for young adults without dependents?

Even without dependents, term insurance can be a proactive financial strategy. It locks in low rates for future coverage, covers any loans, and provides financial stability for family members.

Is term insurance affordable for young adults?

Yes, term insurance is the most affordable type of life insurance, especially for young adults, since premiums are lower when purchased at a younger age.

Can young adults customize their term insurance policies?

Yes, most insurers offer optional riders like accidental death benefits, critical illness coverage, or premium waivers, allowing young adults to tailor their coverage to their needs.

What happens if a young adult outlives the policy term?

If the policyholder outlives the term, the coverage ends, and no death benefit is paid. However, some policies offer return of premium options, though this increases the cost.

How do pre-existing conditions impact term insurance for young adults?

Young adults with pre-existing conditions might face higher premiums or exclusions in their policy. It’s crucial to disclose all medical conditions to avoid claim rejection later.

Should young adults opt for increasing term insurance?

Yes, increasing term insurance can be beneficial for young adults as it adjusts the coverage amount over time to combat inflation, ensuring the payout retains its value.

Is online term insurance a good option for young adults?

Yes, online term insurance is often more affordable and convenient for young adults. Most insurers provide detailed comparisons, making it easier to choose the right policy at a lower cost.