Why You Should Get Term Insurance in Your 20s


One’s twenties are a time of career growth, introduction to responsibilities, and exploration in general. Buying a term insurance plan may seem like a far-fetched idea when one is in their 20s, but the truth of the matter is that there is no better time to insure one’s life than in their 20s. As one begins to earn a steady income during their 20s, they learn the responsibilities that come along with it. They understand the importance of making the right investments and having financial security. There are many benefits to buying term insurance during one’s 20s, the most common one being the low term insurance premiums. Let’s understand this in detail.

What is term insurance and how does it work?

Term insurance is an insurance policy that guarantees financial compensation to your loved ones when you are no longer with them. If the manner of the demise of the policyholder is in accordance with the terms and conditions of the policy, the nominee/s receive/s a pre-decided sum assured. One has to pay the term insurance premium/s as stated in the policy to ensure that the validity of the policy continues. The minimum term insurance age limit is 18 years, while the maximum age limit for coverage may differ from insurer to insurer.

Most people buy their term insurance in their late 30s or 40s. However, experts suggest that one should buy term insurance in their 20s to make the most of it.

Advantages of buying term insurance in one’s 20s

You pay a lower premium 

The premium for a policy is dependent on several factors, namely your age, gender, profession, lifestyle habits, health history, and so on. The factors are used to create a risk profile. The higher the person is on the risk scale, the more will be the premium.

A person in their 20s has a comparatively lower risk profile than someone in their 40s. Individuals in their 20s tend to have stronger immune systems, leading to reduced vulnerability to health disorders. As they age and near their 40s or 50s, the immune system weakens, increasing the risk profile. That is why insurers quote a lower term insurance premium to individuals in their 20s.

Building a huge corpus becomes easier 

When you buy term insurance early, it becomes easier to build a huge life cover than if one were to buy term insurance at a later stage in life. Let’s assume that you want a term insurance plan till the age of 75 years with a life cover of Rs 1 crore to create a financially dignified life for your loved ones. If you were to buy a plan at 25 years of age, your monthly premiums would be Rs 556 only. The premium would increase to Rs 1000 if one would buy it at 40 years of age. Plus, the percentage of the premium increase each year is higher when one buys term insurance at a later stage in life as risks increase faster, too.

This is why it is important to take advantage of the minimum term insurance age limit and buy a policy at the earliest.

You get considerable tax benefits 

Your term premiums are eligible for deductions as per the Income Tax Act. This term insurance tax benefit can be achieved by filing for this deduction under Section 80C in your ITR. Long-term tax planning is also important when one starts earning, and a term insurance plan can help you with that. The death benefit pay-out your family receives is tax-exempted, that is, no tax levied at all on the amount they receive.

Furthermore, tax exemption is also applicable on the maturity benefit pay-out and surrender value pay-out. Do remember that a particular term insurance tax benefit may change as per changes in tax laws.

Coverage grows as you grow 

The term insurance that you buy in your 20s to financially protect your parents can be expanded to include your spouse and children too, as you grow and make new relationships. This helps you fulfil your financial responsibilities at every stage of your life.

Note: The term insurance premium is dependent on many factors besides the age of the policyholder. So, a 27-year-old with a history of a critical illness may incur a higher premium than a 34-year-old with a clean health history.