Getting your first salary is one of the best moments in life. It is the first step in becoming financially independent and curating a life of your own. People often have their special plans about how they would like to utilise their first salary. Some may purchase gifts for their loved ones, while others may buy something special for themselves. While these are noble endeavours, it is also important to keep a certain amount of your salary aside and invest it the right way. Buying a term insurance plan can be an efficient use of this amount.
What is a term plan? It is an insurance product that provides financial cover to you loved ones if the policyholder happens to undergo an unfortunate demise.
Understanding term insurance
Life can take an unfortunate turn at any time. Unforeseen events can have a tragic impact not just on the victim of the event, but also on their loved ones, especially if the person was the breadwinner of the family. This is why term insurance was designed: to mitigate the financial consequences of losing the primary earning member of the family. The sum assured received on the passing away of the policyholder helps the dependents face the new way of life with adequate funds and financial well-being.
Term insurance benefits, such as the sum assured amount, are provided only if the policy is valid at the time of the policyholder’s demise. Furthermore, the manner of demise has to meet the conditions of the policy.
Reasons to buy term insurance with your first salary
The premium is much lower
Most people receive their first salary in their 20s. This is a period of financial growth and exploration. However, this is also a great time to put your money in the right financial instruments. As young people are considered to be in the prime of their health with relatively lower risks, the premium quoted to them for insurance policies is quite low. This is applicable not just to health insurance, but also to term insurance. When you buy a term plan with your first salary, you are beginning a journey that will help you amass a huge corpus for the security of your loved ones.
Newer financial obligations may arise soon
As one starts becoming financially dependent, one also starts looking to have a family of their own. This leads to new people to care for, new responsibilities to handle, an increase in expenses, and so on. Such a change in lifestyle may or may not leave any amount for you to be able to start a term insurance plan at this stage. Therefore, experts recommend buying an offline or an online term plan at the earliest. As you grow and your family grows, you can choose to increase the coverage to meet your expanding needs.
You can enjoy tax benefits
Earning an income means having to do one’s duty as a citizen of the country and paying your taxes. You can cut down on your tax liability by opting for tax deductions and exemptions. If you buy term insurance with your first salary and pay the premiums for the same, you can file for tax deductions against the premium under prevalent tax laws. The death benefit pay-out is also exempted, further increasing term insurance benefits.
You become more financially responsible
Becoming financially responsible is a skill one should imbibe as early as possible. When you keep aside a certain section of your salary to buy a term insurance plan, you are setting up a habit. This habit will not only be helpful in providing for your family in your absence via term insurance, but also assist in better financial management over the years.
Before you buy term insurance, read this…
Now you know what is a term plan and why you should buy it with your first salary. But you might get confused about the insurer you should go ahead with. Fret not, the following points may help:
- Opt for an insurer with a high claim settlement ratio as that increases the chances of your claims being approved
- Check the customer services of the insurer. A supportive customer service staff with 24/7 claim assistance is vital to look for.
- Consider buying an online term plan instead of going the traditional route. The online procedure is easy, saves time, and may even lead to a discount.