Is Buying Child Insurance Plan Early Beneficial?
Updated On Jul 26, 2022
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The age at which you buy a policy will determine whether you pay a high premium or a low one. When you look at it from the lens of life insurance, age is the most important factor that determines how expensive or affordable your policy will be.
When you are young, age favors you in many ways. Good health equals lower insurance costs. A 20-year-old is much healthier than someone twice their age and therefore, pays a lower premium. Their career is on an upward trajectory, so the increasing income will make the premiums even more affordable. It is important to note that the premium stays constant all through the policy term and does not increase with age.
Young Are More Vulnerable
Younger individuals, especially at the start of their career, would have limited savings. However, they probably have the highest number of dependents and liabilities. These could be parents who are approaching retirement age, younger siblings who need to be educated, or even grandparents with critical ailments. There could also be debts that need to be repaid, or a major forthcoming family event, such as a wedding or arrival of a new baby. The ratio between the number of dependents vs. earning members is skewed.
The probability of a younger person having large savings to tide over any sudden financial emergency caused by their death, disability, or illness, is very low. Therefore, insurance provides the best solution to protect their family’s financial stability. This is an important reason to consider when buying risk covers. Remember that the earlier you buy, the more you benefit as the premium is lower. In the event of any unforeseen incident, insurance will protect your family’s future.
Early Bird Advantages
The advantages you stand to gain by starting early:
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Your Health Quotient Makes Your Policy Affordable
As health is an important indicator of the premium payable, your premium will be lower, making the policy more affordable. If you are in good health, you may even be exempted from all the medical examinations required to make you eligible for the policy.
If a 40-year-old and a 20-year-old purchase a term policy for 40 years, with a sum assured of Rs.1,00,00, 000, the former would have to pay an annual premium of Rs compared to the younger person who would only have to pay Rs 5,428.
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Enjoy the Benefits of Compounding
Compounding is when both your base capital and the interest accrued on it are further reinvested to grow your wealth. Child Plans offer this benefit. The longer the tenure of your investment in child plans, the more magnified are the returns. Compounding can increase wealth exponentially over a period of time, which is why it makes financial sense to purchase a child plan policy at an early age.
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Ensuring Financial Certainty for Dependents
The main purpose of buying insurance is to give your family financial certainty. If something were to happen to you, they would be at financial risk as the chance of having a contingency plan is much less at a younger age. A term insurance policy taken at an early age can protect your family and ensure they continue to live comfortably without compromising their lifestyle.
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Protection Against Potential Loss of Income
The pandemic has shown us that things can change overnight. Whole life insurance plans have options that can secure you for a lifetime, till the age of 99. For example, the lifetime income plan assures you of a regular income that can tide you over as a contingency plan to fund expenses, help clear debts, supplement another income, or even plan for your retirement years. It is about ensuring your future earning potential and is more affordable and feasible at 25 than at 50.
Conclusion
Life insurance can facilitate planning systematic savings and earmarking them for specific needs. This will help you fulfill both planned vs. unplanned expenses or important vs. impulsive expenses. Let us take an example of saving for your child’s education. A long-term financial policy like savings linked insurance plans will ensure compulsory savings for the specified need and lock-in till the maturity.
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