The Importance of Term Insurance for Young Adults

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Importance of Term Insurance for Young Adults

As a young individual, when you start earning, you are always advised to invest your income properly for a safe future. Greater emphasis is always placed upon wealth creation so that you can enjoy a better life after retirement. However, such investments might not always help you and your loved ones during emergencies.

One way you can guarantee the financial safety of your loved ones from life risks is by investing in term insurance. If you have started earning recently, read on to understand the importance of investing in this insurance policy at an early stage.

What is the meaning of term insurance?

Term insurance is a type of life insurance policy, in which the insurer compensates the dependents of the policyholder. This compensation is given if the policyholder passes away suddenly during the policy term. The compensation is given in the form of either a sum assured or a death benefit. The amount that your family would receive from the insurer depends on the type of plan that you select. This amount can help your family survive the financial costs of life risks and live a financially secure life.

Why buy this policy at a young age?

If you are someone at the early stage of earning, here are the reasons why you should consider purchasing this policy:

1. Financial security of your dependents

In many situations, you could be the sole earner of your family. What you earn keeps the household running. As a chunk of your income will be spent on vital expenses, you could be left with little to save or invest. This could create problems for your dependents if you were to pass away. Not to mention that the cost of living could increase due to inflation. Savings alone might not help your family survive in your absence. The sum assured from the policy could help them survive the effects of inflation and have a financially secure future.

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2. Affordability

One the reasons why people refrain from investing in this policy is the misconception of its unaffordability. However, the price of the policy depends on when you purchase it. For example, if you purchase the policy at the age of 29, its cost would be relatively lower than the cost of the policy if purchased at the age of 37. As you are healthier and immune to diseases at a young age, the policy is more affordable.

3. Helps in clearing debts

We all have different goals at different life stages. This could be wanting to purchase a house of your own or start a business. You would borrow money either through a loan or through a lender. Once you borrow this money, a certain part of your life will be spent on repaying this amount. However, if you were to pass away suddenly, the responsibility of repayment would fall on the shoulders of your dependents. With no continuous source of income, they could face problems during repayment. In such situations, the sum assured from this term insurance policy can be used to pay off the loan or debt without creating any pressure on your family.

4. Corpus for emergencies

The cost of healthcare also keeps rising along with the cost of living. If you were to pass away, your dependents could have a problem managing the expenses of medical procedures, especially if the procedure was quite expensive. Covering these costs purely on the basis of savings could create financial instability. However, these costs can be managed with the term insurance sum assured in your absence.

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If you want to secure the financial well-being of your loved ones in your absence, consider buying this policy early on. You can use the online term insurance plan calculator to get an idea about how much your policy would cost you.

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