Term Insurance Guide for Young Professionals

As a young professional, planning finances often starts with setting up a budget, building an emergency fund, and saving for future goals. But one crucial step many overlook is securing financial protection for loved ones in case something unexpected happens.

Have you given a thought to term insurance? It’s a straightforward and affordable way to ensure that your family stays financially secure if you are no longer around to support them. Whether you’ve just started earning or are in the early stages of building wealth, term insurance offers peace of mind at a low cost, making it a smart move in your financial journey.

Term insurance is a simple and easy-to-understand kind of insurance plan that provides coverage for a specific period or term.

A key term you’ll often come across is sum assured. It is the amount that is payable to the nominee you choose while buying a term insurance policy. A term plan is often called a pure protection plan because it promises benefits to the nominee in the unfortunate event of the insured person’s death during the policy’s term. A term plan is different from traditional insurance, so in that sense, there are no maturity benefits.

Because of its simplicity, term insurance is a popular choice among young professionals. It is a straightforward kind of insurance cover that you can opt for when you are just starting out. You can choose the term you want: 5,10, 15 or even 20 years.

If you are wondering when you can buy a term plan, the entry age is typically 18 years, and the maximum age is 65 years.

Affordable and Low Premium

One of the main reasons young professionals opt for term insurance is its affordability. The premium you pay for a term plan is lower than the one you pay for a conventional insurance policy. Choosing term insurance early helps you secure high coverage at a low premium and gives you peace of mind knowing your loved ones are protected without straining your finances.

Here’s why term plans are budget-friendly:

• Lower premiums for younger buyers: The earlier you buy, the cheaper your premiums, as insurers consider you low-risk at a young age.

• No investment component: Unlike endowment or ULIP plans, term insurance is purely for protection. Since there’s no savings or maturity benefit, the cost stays low.

• Customisable cover: You can adjust the sum assured and policy term to suit your current needs and income level.

• Scalable over time: As your income grows, you can later upgrade your cover or add riders to enhance your protection.

For young professionals looking to prioritise essential cover without high monthly costs, term insurance is a practical and reliable choice.

Flexible Plans

Term plans are also ideal for young people because of the flexibility they offer. If you wish to exit a term insurance policy, you just have to stop paying premiums. The policy will lapse, and you won’t receive any benefits. However, you can always choose to renew your term plan, if needed.

This flexibility is especially useful when your financial situation or life priorities change. Whether you’re switching jobs, taking a career break, or managing other expenses, term plans allow you to pause or stop coverage without a long-term financial commitment. Some insurers even offer the option to increase coverage or convert your plan later, giving you more control over how your policy evolves with your life stage.

Tax Benefits

Apart from offering financial protection, term insurance also helps reduce your tax liability. The premiums you pay towards your term insurance plan qualify for tax deductions under Section 80C of the Income Tax Act, 1961, up to a maximum limit of ₹1.5 lakh in a financial year.

Additionally, the death benefit received by the nominee is completely tax-free under Section 10(10D), provided certain conditions are met. This makes term insurance not just a safety net, but also a smart component of your annual tax planning.

Here's how term insurance helps with tax savings:

• Section 80C:
  1. Premiums paid can be claimed as a deduction from your gross total income
  2. Maximum deduction limit: ₹1.5 lakh per year
  3. Applies to policies where the premium does not exceed 10% of the sum assured
• Section 10(10D):
  1. The lump sum payout received by the nominee is exempt from tax
  2. No cap on the amount received, subject to policy compliance
• Additional benefits under Section 80D (if applicable): If your term plan includes a health-related rider like critical illness, you may be eligible for an extra deduction under Section 80D (up to ₹25,000 annually for individuals below 60 years)

By combining financial security with tax savings, term insurance proves to be a practical and beneficial choice for salaried and self-employed individuals alike. Always retain the premium receipts and policy documents to claim deductions accurately while filing your income tax return.

Term Insurance Riders

Term insurance plans can be enhanced with optional add-ons known as riders. These riders offer additional financial protection against specific risks and can be customised based on your needs and lifestyle.

• Critical illness cover: This is a rider that helps you avail a certain pre-set amount if you have been diagnosed with any kind of critical illness.

• Waiver of premium: This rider helps you protect your policy in case you have failed to pay your term insurance premium. The reason for non-payment could be a financial emergency or loss of a job. A young person working in the gig economy or uncertain economic conditions may opt for this rider.

• Accidental death benefit: This rider helps when the policyholder meets with an accidental death; the nominee gets the sum assured and the additional amount, thanks to this rider.

• Income rider: The family gets a monthly income for a specified period of time in the unfortunate event of the insured’s death.

• Total/Permanent disability rider: This rider helps if the policyholder suffers from a lifelong disability because of an accident.

• Return of premium: This rider helps the insured get back the premium paid on surviving the term of the policy. In a term insurance policy, there are no benefits if the insured survives the term, but with this rider, the insured gets back the premium paid over the period.

All these term insurance riders can be bought at an additional cost. It helps to choose the most relevant policy and use it to suit your personal requirements.

Conclusion

Term insurance policies can be bought online; choose the iSelect Smart360 Term Plan by Canara HSBC Life Insurance to get multiple options, such as whole life coverage and inclusion of spouse in the same policy, among others. You also have the option to add coverage by way of accidental death benefit, child support benefit or accidental total and permanent disability benefit. There are also other riders available to make your term plan more comprehensive. So, get a term insurance plan when you are young and ensure peace of mind as you focus on other areas of your life.