Term Life Insurance for Young Adults - A Complete Guide

Young professionals often face uncertainty and stress when it comes to managing their finances. One of the fundamental steps of planning your finances at the early stage of your career is to understand the importance of availing the life protection coverage. Before you plan your finances for future goals, it is important to avail of life insurance coverage to financially shield your family against the uncertainties of life such as sudden untimely demise.

Term insurance is simple to understand and the purest form of life insurance. Basically, term insurance is an agreement between the insurance company and the policyholder in which the insurance company assures to pay the pre-defined sum of money (sum assured) to the nominee of the policyholder in case of the untimely demise of the policyholder during the specified term. The benefits are assured in return for the premium paid by the policyholder. The premium that you pay is for life protection and hence there would not be any survival or maturity benefits at the end of the term in case you survive the policy term.

There are several compelling reasons why you should consider buying term insurance at an early age. Here are a few key ones:

• Lower Premiums: The younger you are when you buy a term insurance policy, the lower your premiums will generally be. This is because younger people are typically healthier and present a lower risk to the insurer. Once you lock in a rate, it usually stays the same for the entire term of the policy, so buying early can result in significant savings over the life of the policy.


• Securing Financial Future: Even if you're young and healthy, life is unpredictable. A term insurance policy can provide financial security for your loved ones in case anything happens to you. The earlier you buy, the sooner your loved ones are protected.


• Coverage for Loans: If you've taken on significant debts, such as a student loan or a home loan, a term insurance policy can cover these loans and prevent the burden from falling on your family in case of your untimely demise.


• Better Health, More Choices: The younger you are, the more likely you are to be in good health. Certain health issues can increase your premiums or even make it more difficult to get coverage. Buying insurance when you're young and healthy can give you more options and better rates.


• Benefit of Time: Term insurance plans provide coverage for a specified term. Buying early means you're likely to have coverage when your family needs it the most, such as when your children are still dependent on you.


• Additional Riders: When you're young, you're in a better position to opt for additional riders like critical illness or accidental disability riders. These can enhance your coverage and offer financial support in case of serious illness or disability.


• Establishing a Financial Habit: Buying a term insurance policy early helps inculcate a sense of financial responsibility. It's a good stepping stone to planning for other financial goals such as retirement or investments.

It's always advisable to review your insurance needs at different stages of your life, such as when getting married, having children, taking on a mortgage, etc. While it's beneficial to buy term insurance at a young age, the most important thing is to have adequate coverage when you need it.

Term insurance offers the needed financial protection to your loved ones when you are not around. Let’s understand how term insurance works based on an example. Let’s say, Mr. Suraj, 28 years, is employed in an MNC and has three dependents in his family wife and senior citizen parents. Suraj is the breadwinner of the family. Let’s say he has purchased term insurance coverage of INR 1 Cr for a yearly premium of INR 10,000 for 30 years term. During this term, if Suraj dies, unfortunately, the insurance company would pay his nominee/beneficiaries/legal heirs a lump sum of INR 1 Cr. as a death benefit. The beneficiary can utilize this amount to secure the family’s financial future. If Suraj survives the policy term of 30 years, he would not get anything in return at the end of the policy as a survival/maturity benefit.

However, there are many variants of the term insurance policy. Return of premium term plans would return the total premium paid on maturity if the policyholder survives the term. You would have to pay a relatively higher premium for such variants.

Let’s take a look at the term insurance riders that are generally offered by most insurance companies at an additional cost of the premium. However, the availability of riders may vary from one insurance provider to another. The following are the common riders offered in a term insurance plan:

1. Accidental death benefit rider
In case the insured dies in an unfortunate accident during the policy term, the beneficiary would get the additional sum assured along with the death benefit. Let’s say the insured has availed term insurance cover of INR 50,00,000 and accidental death benefit rider for INR 5,00,000. Then if the insured dies in an accident, the beneficiary would get INR 50 lakhs + INR 5 lakhs as the death benefit.

2. Critical illness benefit rider
Critical illness benefit rider in a policy provides coverage to the insured upon diagnosis of terminal illnesses like cancer, paralysis, stroke, kidney ailments, etc. The number of critical illnesses covered under the rider may vary from one insurance company to another. Continuation of the policy or the termination after a diagnosis and upon payment of benefits would vary as per the policy terms and conditions.

3. Accidental disability benefit rider
In case the insured suffers an injury during an accident that leads to total/partial permanent disability or temporary disability, then the insured can get benefits from this rider. Term insurance plans with this rider would make payments as a replacement for lost income for a specified period in the policy.

4. Waiver of premium rider
In case the insured becomes unable to pay the future premium due to disability leading to loss of income, this rider waives off all the future premiums keeping the benefits of the policy intact.

5. Income benefit rider
After the death of the insured and the lump sum benefits are paid, this rider can work as an income source for the family for a specific period or years.

6. Return of premium benefit rider
Return of premium rider helps the insured to get back all the premiums paid on maturity if he/she survives the policy term.

7. Tips to Buy Term Insurance Plan
The following are some of the important things to keep in mind while buying term insurance coverage.

8. Assess the life insurance cover you need
It is important to avail an adequate amount of life insurance coverage. You can assess your life insurance coverage requirement based on various factors such as your life phase, future needs of your dependents, number of dependents, long-term goals, lifestyle, and many more. However, you can enhance the policy coverage later in your life based on the changing needs.

9. Choose policy terms and riders carefully
It is vital to choose the policy term wisely. It is often advised to buy coverage till your retirement age as you have an income flow and family dependency. Decide your policy term accordingly. Adding riders based on your needs is also important to make it affordable for yourself.

10. Explore online
The most important thing is to shop rationally for life insurance plans. There is a variety of term life insurance plans available in the market. It is important to explore and analyze them based on their features, benefits, and cost. Comparison shopping is the key to getting the right term insurance plan. Remember, buying online gives you the advantage of easy comparison and cost-effectiveness due to no intermediary charges.

11. Start early
It is always important to keep in mind that starting early is extremely important when it comes to availing of life protection. If you start early, you can get the maximum coverage at the nominal rate of premium.

Understanding the importance of term insurance is crucial for young professionals. It is important to avail the protection for your family before you start your financial planning. Be adequately insured and plan your finances wisely.