How to Choose Term Insurance By Age (Between 20s to 50s)

What Exactly is Term Insurance?

When is the Right Age to Buy Term Insurance?

When is the Best Time to Get Term Life Insurance Coverage?

You can buy term insurance at different stages of your life. Here’s a simple breakdown to help you understand when it might be the best time for you:

Age Group Details What to Consider
20s Lowest premiums, longest coverage and excellent health
  • Perfect for looking in affordable rates early, even if you don’t have dependents yet.
  • Ideal for future financial planning (buying a home or starting a family).
30s Still affordable premiums with growing financial responsibilities
  • Great time to secure coverage as responsibilities increase (marriage, kids, or mortgage).
  • Health is still generally good, but minor issues may start to appear.
40s Ensures financial protection during peak earning years
  • Premiums are higher, but coverage is critical for dependents (kids education, ageing parents)
  • Health risks like high blood pressure or diabetes may arise.
50s Provides peace of mind for final expenses or leaving a legacy
  • Premiums are the highest, but coverage can still be valuable if you have dependents or want to cover end-of-life costs.
  • Health risk increases significantly.

Term Insurance in Your 20s

In your early 20s, you are starting your career with your first job. At this stage, you are usually healthy and do not think much about saving for the future or planning for retirement.

Many delay or ignore buying insurance, but this is the best time to start. Your expenses are lower, and term life insurance is very affordable. It can help you save on taxes as soon as you start earning.

Example: Riya, 25, has her first job at a tech startup in Bangalore, earning ₹6,00,000 annually, and wants to ensure her family’s financial security. She selects a term insurance policy with a sum assured of ₹1 crore and a premium of only ₹500 per month for a tenure of 40 years. She also adds a critical illness rider for ₹20 lakh to safeguard against health issues.

Term Insurance in Your 30s

In your 30s, you might be entering new life phases like marriage. This is a great time to invest and create a strong financial foundation for your family. You'll need more term insurance coverage to protect your spouse and future children financially. Ensure your term insurance covers any loans or credit for things like a house or car.

Example: Giridhar, 34, a father of two who recently bought a home for ₹50 lahks, decided to get term insurance with a sum assured of ₹1.5 crores and a tenure of 30 years. With big responsibilities on his shoulders, he wants to ensure his family can keep their lifestyle if something happens to him by creating a safety net for housing and education needs.

Term Insurance in Your 40s

In your 40s, with a more established career and growing family, it's crucial to reassess your financial goals and ensure your term insurance coverage is adequate. You may have significant financial responsibilities like children's education, mortgage payments, and other debts. A term insurance policy can cover these expenses and provide financial security for your family in case of an unexpected event.

Example: Fardeen, 45, the sole breadwinner of the family with a mortgage and upcoming education tuition for his child, gets term insurance with a critical illness rider for ₹2 crores. By doing this now, he protects himself and his family from financial stress if something unexpected happens. He also avoids higher premiums that come with health issues, ensuring his family's financial stability for the future.

Term Insurance in Your 50s

In your 50s, approaching retirement, you may have fewer financial obligations as your children become independent. However, it's still important to maintain term insurance coverage to protect your spouse and any remaining debts, such as a mortgage. Consider potential healthcare and long-term care costs to ensure financial stability for your loved ones.

Example: Atul, 56, has a homemaker wife and a financially independent daughter. He still has a personal loan of ₹10 lakh and worries about his spouse's financial well-being if something happens to him. He invests in term insurance with a sum assured of ₹50 lakh to ensure his family has funds to cover estate taxes and inheritance, giving them financial security as he nears retirement.

Term Insurance Benefits Based on Age

Comparing Term Insurance Premiums for Different Age Groups

Let's understand the advantages of purchasing term insurance compared to your age groups for a ₹1 crore term insurance plan. These are annual premiums with standard rates for healthy, non-smoker, non-drinker salaried life, including GST.

Age Annual Premium (Incl GST)
In your 20s ₹11,120 - ₹12,644
In your 30s ₹15,100 - ₹18,868
In your 40s ₹24,353 - ₹32,321
In your 50s ₹45,308

As you can see, premiums nearly double every decade. So, buying life insurance early means you lock in a lower rate for the entire policy term.

How Much Term Insurance Do You Need?

Types of Term Insurance Plans

Term insurance plans are designed to protect your loved ones financially if something happens to you. Here’s a simple breakdown of the different types of term insurance plans:

Level Term Plan

It’s a straightforward and popular option, making it easy to understand. Level term insurance plan offers a fixed sum assured that your beneficiaries will receive if you pass away during the policy's term. The amount you pay for the premium remains the same throughout the policy.

Increasing Term Plan

Increasing term insurance plan increases the amount paid out to your beneficiaries over time. This is particularly helpful as it helps counter the effects of inflation, ensuring that the value of the payout doesn’t diminish over the years. However, the premiums paid are higher as the coverage grows.

Decreasing Term Plan

This plan is characterised by a decreasing sum assured, meaning the amount your beneficiaries would receive decreases over time. It’s ideal if you want to cover specific debts that decrease over time, like a mortgage or personal loan. However, the premiums remain consistent, which makes budgeting easier.

Return of Premium (ROP) Plans

Term insurance with return of premium plan allows you to repay all your premiums if you outlive the policy term. Typically, these plans have slightly higher premiums because of the refund feature, which provides a kind of savings component, offering peace of mind that you won't lose your investment if things go well.

Important Factors to Consider When Choosing a Term Insurance Plan

Tax Benefits of Term Insurance Plans

Term insurance is not just a way to secure your family's financial future; it also provides attractive tax benefits under the Income Tax Act. Here's a breakdown of how it works:

Tax-Deductible Premiums

Premiums paid for term insurance can be deducted from your taxable income. Under Section 80C of the Income Tax Act, you can claim deductions up to ₹1.5 lakh, reducing your tax liability.

Tax-Free Death Benefit

The death benefit paid to the nominee is entirely tax-free. Under Section 10(10D) of the Income Tax Act, the amount received is not subject to income tax, ensuring full financial security for your loved ones.

Common Mistakes to Avoid with Term Insurance

Regarding term insurance, avoiding common mistakes can save you money and ensure you have the right coverage. Here are some key mistakes to watch out for:

1
Don't skimp on coverage to save on premiums; it can lead to higher out-of-pocket expenses.
2
Buying later can mean higher premiums and potential health issues, making it harder to get coverage.
3
Don’t hide medical information; always be honest about your health to avoid claim denials.
4
Don’t ignore inflation. Ensure your coverage accounts for inflation to maintain its value.
5
Consider adding riders for extra benefits like critical illness coverage.
6
Choose a policy that meets your needs, not just the cheapest premium option.

Frequently Asked Questions

How much term insurance coverage do I need in my 20s?

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In your 20s, a good rule of thumb is choosing a coverage amount 10-15 times your annual income. For instance, if you earn ₹5 lakhs annually, consider a term insurance coverage between ₹50 lakhs - ₹70 lakhs.

Is it really necessary to buy term insurance when I'm young and healthy?

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Absolutely. Your 20s are actually the best time to purchase term insurance as you qualify for lower premiums due to better health conditions and lower risk profile.

Can I change my term insurance policy later?

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Most term insurance policies offer flexibility, but the options vary by provider. Some common modifications include:

  • Increasing coverage amount
  • Extending policy term
  • Adding or removing riders
  • Changing nominee details

Should I get term insurance in my 20s?

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Yes, getting term insurance early provides greater financial protection for your family.

Does buying a term insurance plan help save tax?

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Yes. You can claim the premium amount as a deduction under Section 80C of the Income Tax Act, which helps you save on taxes.

Does buying in your 20s ensure lower rejection rates?

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Yes. Younger applicants, especially those in their 20s, have lower rejection rates than older individuals, as they are less likely to have chronic illnesses.

Should I get term insurance in my 30s?

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Yes, getting term insurance in your 30s is beneficial as it offers lower premiums, financial security for dependents, and coverage for debts and future responsibilities.

Which term plan is best at the age of 40?

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Pure term plan is the best choice at age 40, providing robust coverage and competitive premiums.

Should I get term insurance in my 50s?

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Yes, getting term insurance in your 50s can provide financial protection for dependents and cover outstanding debts, though premiums will be higher.

Does buying in your 50s ensure lower rejection rates?

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No, buying term insurance in your 50s does not ensure lower rejection rates; in fact, rejection rates may be higher due to increased health risks.

Can you buy riders with a term insurance plan in your 50s?

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Yes, you can buy riders with a term insurance plan in your 50s, such as critical illness cover, accidental death benefit, and waiver of premium rider.

What is the best age to get term life insurance?

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The younger you are, the cheaper your premiums will be. It's usually cheaper at 25 than at 40, and waiting until 60 can make it much more expensive with fewer options.

How to decide the right age for term insurance?

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You need to be at least 18 years old to get term insurance. The maximum age is usually 65, but this can vary.

What is the best tenure for term insurance?

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If you're in your 20s, consider a 40-year term or coverage until age 99 to lock in lower premiums for a longer period.

When should I choose term life insurance?

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Term life insurance is a good option if you need coverage for a specific period, like until your debts are paid off or your children are financially independent.

How many years is best for life insurance?

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Match the term of your life insurance to your financial obligations, like the length of your mortgage or until your children are financially independent.

Can a 70-year-old buy term insurance?

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Yes, many insurers offer term insurance to people aged 60-85 to help secure their family's financial future.

Disclaimer

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  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.

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