What insurance covers should you opt for when you start your first job

 

Landing with a first full-time job is an exciting and memorable occasion, no matter who you are or where you live. You’re perhaps in your twenties, recently graduated or maybe you’ve done your masters, and now you have embarked upon the professional journey. The thrill of getting disposable income in your hand makes you want to spend it lavishly. You’re in an upbeat mood, and do not you may not want to be weighed down by serious issues. Things like insurance may not interest you at the moment, rather it may seem like something that can surely be put off for a later date. But should it be?

Here are three reasons that tell you why you should buy insurance right at the onset of your career.  

  1. Life and health insurance get increasingly more expensive with age. Insuring early in your life also means that you save money by locking in a lower premium amount for the rest of your life.
  2. In your twenties, your liabilities are comparatively less, and so it is easier to develop the discipline of setting aside a part of your income for the insurance premium.
  3. Insuring early in life makes you financially savvy, and protects your and your family’s financial interests from risks and uncertainties.

 

Now, the question that arises is what covers you should opt for.

Life Cover 

The first and foremost cover that comes to mind is life insurance. It is an essential part and unavoidable part of your financial plan. Two popular options that are available in life insurance plans are term insurance and endowment plans.  Let’s look into the two options and see which one might be more suitable when you have just begun your career.   

Term Insurance

A Term insurance plan covers the life of the insured person for a specific “term” (number of years from the purchase of the policy). If the holder of a term insurance plan dies within this covered period, then the family of the holder receives the death benefit.  

Endowment Plan

An endowment policy is an insurance cum investment instrument that offers both protection in times of crisis and simultaneous growth of money invested. 

It needs to be clearly understood is that term insurance is a not for profit plan. Wealth creation is not possible through term insurance. Nor does it provide any hedge against inflation. On the other hand, the endowment plan offers survival benefits to the holder.

Yet, a term insurance cover could be best suited at the beginning of your career. Here is why.

  1. Term insurance is the cheapest amongst the Life Insurance Products. So it does not burn a hole in your pocket when you have a beginner’s salary at the onset of your career. Discontinuing a policy midway can lead to losses, so it is highly recommended that you buy a policy that you will be able to continue without compromising on your other financial necessities. 
  1. The premium for a term insurance is low for a healthy person in his twenties. The premium increases when one gets insured at a higher age, and the increase is rather steep at later ages. So it is best to start early.
  1. It is generally not a good idea to mix insurance with investment for generating returns. As term insurance is cheaper than other types of insurance, it leaves you with a bigger portion of your salary to invest in other instruments that can generate higher returns for growing your wealth.

Many corporate groups offer life insurance to their employees. However, the cover offered by your employer terminates when you switch jobs. So, it is sensible to buy a separate individual term insurance policy, which covers you sufficiently during the period when you are between jobs or if you want to start your own business at a later date.

Apart from securing your family against the eventuality of death, you should also be prepared to pay the charges for your medical treatment or hospitalization, should the need arise. That makes health insurance a must- have plan, right from the beginning.

Health Cover

Health insurance plans provide coverage for hospitalization due to illness or accident, as specified in terms and conditions of the policy.

Most corporate groups in India offer health insurance to their employees as an employment benefit. When you join the company, you would opt for corporate health insurance policy. These policies provide a basic cover to take care of medical emergencies for you and your family. Some corporate group insurance policies cover your parents as well.

However, it may so happen that the cover provided by the corporate health insurance may not be adequate. In such a case, besides availing the corporate health insurance benefits, you may consider purchasing a separate health insurance policy to cover the extra expense over and above the corporate cover. This will also provide you with a health cover when you are between jobs or when you decide to leave your job to start your own venture.

So, now when you’ve started your first job, is the best time to take the first step in getting insured  a portion of your income to secure your own future and that of those who are dependent on you.

To know about different Health covers that one needs at different stages of life,  you may refer to the following article:

Health Insurance cover you must get at different stages of life

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This post is written in an association with Tomorrow Makers to create financial awareness.

You need to do due diligence and adequate research before selecting a product to suit your needs.

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    By: Somali K Chakrabarti

    Hi there ! I am a management and leadership coach and a ‘çlinical blogger’. Well, that’s what my family & friends call me now ! Here, I tell stories of different brands, how people relate to the brands and the values, beliefs and emotions that they associate with the brands. Hope you enjoy reading my posts.

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