What Millennials Should Know When Buying Term Insurance?
According to a leading survey, only one out of five insurance buyers opt for term insurance in urban India. The young generation known as ‘millennials,’ want to live their life to the fullest, term insurance has become a hard pitch to sell. These millennials have a wide array of likes and interests and wish to utilize the maximum of their disposable income. Often, this mentality makes them oblivious to life’s uncertainties.
These are people who grew up surrounded with technology. They are comfortable with technological devices, mobile phones, the internet, social media and video gaming. They give more importance to life experiences over material possessions. They want independence in decision making and are hard to please by employers. They have a penchant for adventurous activities and believe in the YOLO (You Live Only Once) culture. In addition to this, millennials have a habit of procrastination. They understand the importance of a term insurance plan and its benefits but are too carefree and lazy to actually purchase such a product.
India has a sizable millennial workforce, around 46%, and contributes to nearly 70% of its household income. It is thus essential that millennials understand the benefits of term insurance and opt for it. They need to re-evaluate their spending options considering life’s uncertainties and look around the variety of insurance options available to them.
Do millennials need term insurance?
Yes, they do. Term insurance is the purest and most affordable form of life insurance that offers financial cover for life’s uncertainties. A key benefit for millennials here is if they opt for the term policy, they can leverage a maximum cover at very affordable premiums. Term insurance is needed by everyone of all ages and from all walks of life. At every stage of life, one has certain financial obligations. Term Insurance is one of the best ways to mitigate the risk of a mishappening.
What should you know when you are buying term insurance?
- Length of the cover: One of the critical things to consider while purchasing term insurance is the length of the cover. Basic term plans offer life cover for a specified term. Some term plans provide cover up to 99 years of age. As mentioned before, millennials have age on their side and can opt for a lengthier and larger cover at affordable premiums. It is prudent to take the term insurance for the longest possible tenure. The term insurance, when taken at a young age has the benefit of lower premiums. It is prudent to take the term insurance for as long as possible tenure
- Additional covers: Make sure to pay attention to all the rider options. Identify the riders which you feel will be beneficial for you -
- Accident leading to permanent disability - This rider guarantees payouts in case of disability. It protects the family from the financial burden resulting from the disability of their key earning member. The probability of a debilitating injury can be determined based on the nature of the job and activities one is interested in. .
- Critical illness - Critical illness may strike anytime irrespective of age. This rider helps the dependents of the insured in case of critical illness.
- Premium waiver - This is a great rider to consider. Insurance companies waive premiums under specific situations such as if the insured suffers from critical illness or disability and cannot pay premiums. The cover remains active in such cases, but the remaining premiums are waived off.
- Return of premium - The return of premium option is not a rider, but a completely distinct form of term insurance plan. The policy offers a maturity benefit if the insured survives the policy term. The insurance company refunds the entire premium paid during the tenure when the policy matures and the life assured is surviving at the time of maturity .
Here’s a quick look at some specific reasons why term insurance is beneficial to millennials:
- The insurance premium is lower when you start term insurance at a younger age. You can opt for a considerable sum assured at affordable premiums. This makes term insurance a cost-effective option for millennials.
- Apart from being affordable, term insurance provides much needed financial cover for your family. Millennials are typically fond of YOLO (You Only Live Once) culture, but there is no escaping from life risks. One should plan for the financial security of their family if something happens to them.
- Education loans or other debts: If you are young and have student loans or other obligations, you do not want your family to struggle with your debts in your absence.
- As per Section 80C of the Income tax act, there are tax benefits associated with premium paid for term insurance.
The millennials are risk-takers, bold, and hungry for new adventures. They are highly agile and adapt to new norms quickly and efficiently. They are, however, prone to the same risks as other generations before them. Taking an affordable term plan is one of the bare minimum actions that enable them to live their lifestyle as per their terms while ensuring their family’s financial security.