If you are a millennial, your investment habits most likely look different from your parents. This is because, in the last few decades or so, the world has changed dramatically in terms of lifestyle. The impact of which is visible in our economy, way of living, and even financial choices.
Thus, the millennials’ approach to products such as life insurance, which is one of the essentials of a financial plan today, is also distinctive. If we were to define an average millennial investor’s characteristics, words such as high risk-tolerance and goal-centric mindset would be commonly used.
So, as a millennial, it is possible that life insurance may not be the priority on your to-do list. But we are here to tell you that it should be for several reasons.
Let’s take a look at some of them:
1. Responsibilities Of Dependents
When you are in the earlier stages of life, you are not necessarily thinking of securing your future with life insurance. Perhaps, because you do not have financial dependents yet, but, even if you are unmarried, you may be contributing to your household and share the financial responsibility of your parents or siblings.
Life insurance in India allows you secure coverage for your life and create a shield of protection around your family members. It assures you that in case of an eventuality, they will remain financially stable. Moreover, as a millennial who is planning to start a family soon, insurance can be a crucial addition to their investment portfolio.
For instance, 30-year-old Mr. Tandon, who wishes to have a child in the next two years, wants to put together a sound financial plan with life insurance. Like many people, he intends to use insurance as a savings tool with the benefit of life cover.
Since the policy period for life insurance in India is long-term, with an option to keep it for the entire lifespan, it can also build a substantial corpus over time. Depending on the types of life insurance policy, the accumulated wealth can cover significant expenses such as a child’s higher education, marriage, etc.
2. More Affordable During Younger Days
A younger individual may have an advantage when buying life insurance in India. Insurance providers are essentially covering the risk factor of a policyholder with life insurance. Therefore, a thorough risk assessment based on the individual’s medical condition, occupation and other relevant factors is conducted.
The higher the risk, the costlier can be the price of insurance. This means, if you are suffering from a health problem, the premium will be adjusted accordingly. With younger individuals seeking life insurance, the risk factor is generally lower. Therefore, buying insurance earlier in life can be easier on your pocket.
Since the policy term is also spread over several years, it automatically reduces the financial burden substantially. You can also choose to pay off the premiums early and enjoy life cover for the rest of the policy term. Delaying the purchase of insurance can be counterproductive, as you might have to pay higher premiums for adequate coverage.
3. Future Liabilities
As you grow older, financial obligations also increase. At 45, Mr. Tandon will not have the same lifestyle he had at 30 years old. The cost of living will have increased exponentially, and therefore, he needs a dependable financial plan. He might also have outstanding debt repayments from a home or car loan.
At this stage in life, buying life insurance can be heavier on his income. With diverse financial obligations, the impact of inflation should also be considered in such a scenario. If he lays down the foundation with suitable insurance in advance, it can help to keep his finances steady through unforeseeable circumstances.
4. Additional Cover
You might be wondering if you need insurance if you are already covered with the employer’s life insurance. While it is a relief, it may not be sufficient to cover your actual expenses. The proceeds from the employer’s insurance can act as additional security when the time comes. But, standalone insurance customized to your requirements is certainly more helpful.
Organizations usually cover employees under a group life insurance plan, wherein the sum assured is divided among several people. So, if your family is only entitled to the employer’s life insurance benefits, it may not be enough. Therefore, make sure you estimate the adequate amount for your family and get cover with a suitable insurance plan.
5. Tax Savings
With the rising lifestyle needs, each person is on the lookout to reduce their expenses. According to Morgan Stanley research, millennials are the chief wage earners in most households, constituting 70% of total household income.
Life insurance in India is one of the popular tax-savings tools that can serve the purpose. Under Section 80C of the Income Tax Act, 1961, the premiums paid toward insurance are entitled to a tax deduction.
If you plan to buy life insurance, make sure you compare the various plans available and choose a reliable insurer. Secure your loved ones at the right time with appropriate measures to avoid disappointments in the future.