Earning your first salary is a milestone you’ve been looking forward to for years. After school, college, internships, and hard work, that first paycheque hits differently. If you are in your early 20s and just starting your career, you may have thought about how you will use your first salary. You may want to buy gifts for your family, upgrade to a new phone or watch, treat yourself to a nice dinner, or even plan a trip to the hills or the beach.
But there is one important thing that usually does not make it to that list, even though it should – buying term life insurance. A term insurance policy is one of the smartest financial decisions you can make at the very start of your career. Let’s understand why.
Reasons to buy term insurance with your first salary
1. You would save money
Now, this may feel counterintuitive at first. After all, how can spending money on a term plan help you save? But that is exactly what happens when you buy term insurance with your first salary. When you are in your early or mid-20s, you are usually in good health and have a lower risk profile. Hence, you qualify for significantly lower premiums, even if you choose a high sum assured.
If you wait till later in life, such as your 30s or 40s, you may have health conditions or simply be considered a higher-risk individual due to age. The same policy with the same coverage can cost you much more. So, by purchasing a term insurance policy at the beginning of your career, you can save a substantial amount over the long run.
2. You would lower your taxable income
Getting your first pay cheque feels amazing, doesn’t it? But this feeling only lasts until you notice how much of it goes away in taxes. Now that you are part of the workforce, the government wants its share, and you are legally required to pay it. Sounds like a bummer, but there is a way around it with term insurance.
Certain financial products qualify for tax deductions under the Income Tax Act, 1961, and term life insurance is one of them. The premiums you pay for a term plan can be claimed as a deduction of up to ₹ 1.5 lakh per year under Section 80C. This helps you bring down your taxable income every year you pay the premium. So, you pay less tax and save more from your very first salary.
3. You would take care of one of the most important financial goals early in life
Now that you are stepping into the real world, it is time to prepare for real-world responsibilities. Until now, you have likely always had the security of your family. If anything went wrong, your parents or grandparents were there to support you. But as you enter your 20s and move forward, the dynamics slowly shift. Your parents begin turning to you for help, and over time, their well-being becomes your responsibility. If something unfortunate were to happen to you, their financial stability could be shaken. That is why protecting their financial interests becomes so important.
Buying term insurance from your first salary helps you check off a crucial life goal early on, which is to secure the future of your loved ones. If something happens to you, the term plan provides your family with a guaranteed sum assured, which ensures their financial security even in your absence.
4. You can build a savings pool for later
Did you know that term life insurance is not just for providing financial support in the policyholder’s absence? Some term plans also offer maturity benefits. Yes, you read that right! Certain term insurance plans return all your premiums if no claim is made during the policy tenure. These are called Return of Premium (ROP) term plans.
For example, imagine you buy a term plan at the age of 25 with a tenure of 35 years. When you turn 60, the policy matures. If there were no claims during those 35 years, you would receive a refund of all the premiums you paid. In a way, you end up saving indirectly over the long term. This lump sum amount can then be used for your future goals, such as retirement, healthcare needs, or any other financial priority you may have at that stage.
Buy a Term Insurance Policy with Your First Salary
When you are buying term insurance for the first time, it is important to make a smart decision. Start by comparing multiple plans and evaluating their premiums. You can take the help of a term insurance calculator to choose the right cover. This helps you choose a policy that is affordable yet comprehensive enough to protect your family.
Next, take a moment to think about your life goals and the number of people who depend on you or may depend on you in the future. This usually includes your parents today, and eventually a spouse or children. Consider their lifestyle, needs, and the kind of financial support they would require if something were to happen to you.
Finally, always buy your term plan from trusted and well-established insurers. Term insurance is a long-term protection tool, and choosing the right insurer now will ensure that you can enjoy peace of mind for many years to come.
Rush to Buy a Term Insurance Policy now
Let term life insurance be the very first thing you buy with your first salary. Think of it as a gift you give not just to yourself, but also to the people you love the most. It offers financial protection and peace of mind. It stands quietly by your side through all of life’s ups and downs, and safeguards your family even when you are not around to do it yourself.
