How early should you buy insurance?

Ramesh is 28 years old and is working in a big MNC. He has just returned from a trip to Singapore with his wife. An agent approached him for life insurance but Ramesh was of the opinion that it was too early to think about life insurance. He did not want to pay annual premiums when he knew that he had got along life ahead of him.

This is the case of every young person who thinks that life insurance is for old people and hence is reluctant to invest money in life insurance.

But buying a life insurance early in life can be advantageous financially as well as logically for the following reasons:

1. The premium that you pay on your insurance policy is mainly dependent upon two things—your age and the tenure of the policy. The younger you are the lower is your insurance premium amount. At younger age, you would be physically sound and may not be suffering from illnesses. This would entitle you to a lower premium on the policy. Therefore it is advisable to buy insurance at an early age to reduce the cost of insurance. For example, if you take up a term life insurance  of Rs. 10 Lakhs for a period of 25 years at age of 28 , your annual premium will be Rs. 3356 /-whereas same insurance at age of 40 will cost you an annual premium of Rs. 8306 /-.

2.  Typically, a person gets a life insurance policy in the middle of their life spans – when they are in their forties or fifties. At that time, they may have already fallen into the grip of bad habits (smoking, obesity, heavy drinking) and diabetes, heart disease, cancer or HIV may have entered their health picture. All these conditions can hike the premiums or make it harder to get a policy. An early insurance in life, before you have to encounter any of these problems, should allow you to pay less expensive premiums.

3.  Ideally speaking, if you are supporting individuals whose livelihood depends on your income it’s time to look at life insurance.