Smart people work in the present and plan for the future. If you look back, you are, what you are, today, because of the actions or incidents of the past. Life Insurance is a long-term investment, a hedge, protection, guarantee and assurance against the unknown.
It is natural for 25-year-olds or persons who have recently begun their careers to wonder whether they should buy the best life insurance plan, which is generally associated with old age, ill-health, retirement or even death. But did you know that insurance cannot be purchased when you need it the most? Insurance companies do not extend coverage to ill persons, albeit pre-existing illnesses may be covered after a defined waiting period.
Understand Why Life Insurance Plan is Important for 25-Year-Olds?
Life insurance may not be available when required and, ergo, insurance should be purchased when it is seemingly least required. Cost is proportionate to age. Start early to avail of a policy with a low premium. The premium remains unchanged throughout the term once you sign up.
From a savings and wealth creation perspective, the earlier the better, to enjoy the power of compounding. If you start saving and investing early on, your money will work hard by itself and grow multi-fold by the time you retire.
a) Cost-saving on protection plansb) Growth opportunity in investment life insurance plans
Investment cum insurance policies such as ULIPs allocate money in portfolios depending on age. If you are young, a large chunk of your investment will go to equities because over the long run, equities give unmatchable returns.
Portfolio managers move your money to debt instruments, to preserve wealth, as you age and approach retirement. If you start late, you may not be able to take advantage of the bull runs in the equity market and may have to stay content with capital-preserving debt instruments.
Roles and Responsibilities of a 25-Year-Old
Contrary to popular perception, all 25-year-olds are not free from financial commitments. Some have to repay their education loans whereas others take care of their financially dependent parents. Responsible children from underprivileged families support their siblings until they are also financially independent.
a) Dependent parentsb) Investing in the growth of younger siblingsc) Saving for own higher or further education
Future Milestones of a 25-Year-Old
At the age of 25, a person may or may not have existing financial commitments depending on their circumstances. However, as s/he traverses through the journey of life, the challenges and uncertainties are bound to increase. With marriage comes an added responsibility of caring for the spouse, and children bring in loads of joy along with dreams for their bright future.
In this game of life, what if you do not get another chance to handhold your loved ones and live through all those plans that you made together?
a) Buying a houseb) Vacationsc) Lifestyle purchases, i.e., home theatre, interior design, etc.d) Retiremente) Children’s life goals, i.e., higher education, marriage
Recommended Plans for 25-Year-Olds
When you are young, you must lay a solid and sustainable foundation for your future. From a financial planning perspective, you must aspire to create wealth, have a dependable corpus that is not subject to market risks and create financial protection to safeguard your family in case of your unfortunate, untimely demise.
1. Unit Linked Insurance Plans (ULIPs)
Invest 4G plan, offered by Canara HSBC Life Insurance, has four broad investment strategies and seven options of funds to help you multiply your investment. Automatic rebalancing maintains the specific allocation despite market fluctuations and thus your investments are maintained in the original % allocations.
Systematic Transfer Plans (STPs) allow transferring units from one fund to another fund depending on market movements. In the long run, ULIPs are proven to aid in creating wealth.
a) Invest in diversified equity funds systematicallyb) Automate your portfolio managementc) Protect your family’s financial goal from your early demised) Switch to safety in the final few years of the investment
2. Guaranteed Returns
Guaranteed returns are possible if money is invested in safe instruments such as debts, bonds and G-secs. For example, the Guaranteed Income for Life gives guaranteed pay outs if you invest by paying premiums for a specific Premium Paying Term. The legacy and backing of top-class banking institutions such as Canara Bank, HSBC Life Insurance make it a reliable, dependable and trustworthy source.
3. Term Insurance
All plans can go awry if God has made His plans for you. Hedge all risks with term insurance because your loved ones will still have to lead the rest of their lives with dignity and will need food, clothing, shelter and education.
Term insurance, such as iSelect Smart360 Term Plan, gives a lump sum amount called sum assured (SA) to the nominee, in case of your unfortunate demise. The disability riders get activated in case of total permanent disability. Such benefits act as supplementary protection to help tide over financial challenges. The future premiums are paid by the company and the life cover continues as usual.
Keeping in view the uncertainties of life, the volatilities in employment and rising costs of living, it is important to start financial planning early on. A comprehensive financial plan focuses on savings, wealth creation, risk coverage and post-retirement income. You gain by starting early but put yourself at grave risk if you do not.