Start early to avail maximum benefits

It is said that starting early helps one in life. And, this is applicable to buying life insurance products too. Starting a life insurance policy provides a great advantage in terms of premium, savings and policy benefits.

Life insurance product is an integral share of successful and strategic personal financial planning.

The premium paid on a life insurance policy depends on many factors, including the type of policy, the death benefit amount, age and health at the time when the customer takes out a policy and this is applicable for both — pure term policies as well as savings policies.

Younger age groups

In respect of pure term plans, the premium is always less for younger age groups when compared with older age groups for the same term and sum assured.

The advantage of lower premium available to the younger policy holder is available all through the term of the policy. 

Moreover, as age increases, the probability of health being affected by lifestyle diseases is higher and then getting a life insurance premium at normal rates is also difficult.

Health condition

But by buying life insurance at a young age, it ensures that even if something happens to someone’s health in the future, that person’s rates will always be based on his or her health at the time the policy was purchased.

The key mantra in taking pure term plan is to take the product earlier and for the maximum possible term.

In both traditional as well as unit linked savings plans, taking a policy at younger age group provides distinctive advantage to the policy holder.

In respect of traditional savings policies, taking policies at younger age means lower premium and this combined with longer term of the policy provides for higher maturity value.

Invest in equities

In unit linked products, younger customers need to take longer term policies and if they exercise the option to invest the money in equities, they are certainly in vantage point in accumulating wealth by beating inflation.

In unit linked, since the mortality charges are deducted from the total premium, while arriving at the investible funds, only lower mortality charges will be deducted for young age customers leading to higher investible funds for longer duration.

As against this, for a customer taking a unit linked insurance plan (ULIP) by the age of 45, a substantial portion of the total premium paid will be deducted and only less money is available as investible fund.

Moreover, the time period available for investment is also less, based on the market scenario, the return to the customer will be affected.

(The writer is Managing Director at Shriram Life Insurance)