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The COVID-19 pandemic led to an increase in the number of millennials opting for Life Insurance in India. But there is room for a further increase, considering millennials form a huge chunk of India’s population and are known to be technologically adept and smarter with their investments.Many millennials who are just starting their careers and have no plans to start a family soon think insurance is an unnecessary expense. However, experts point out that buying Life Insurance sooner than later is better. In fact, many Life Insurance products today are aimed at millennials. One such product that is best suited for millennials is Term insurance .Let’s look at some reasons millennials should start investing in Term Insurance plans if they haven't already. Also read: Why 20’s are not considered early to buy a Term Insurance plan
Why Term Insurance is better for millennials
Term Insurance is for a fixed tenure and provides a death benefit (monetary payout) in case of the policyholder’s untimely demise. Term Insurance is generally recommended for millennials who are in the early years of their career for the following reasons:
Lower premiums
The policyholder's age plays a big role in determining the insurance premium. You are likely to be healthier when you are young. So, you can get wider coverage at a relatively lower premium than you would if you were 10 years older. Also, Term Insurance premiums remain constant throughout the policy tenure. If you buy early, you get life protection for an affordable price for a longer period.
Financial cushion for family members
If you are the primary breadwinner in your family, other members will depend on you for all their financial needs. A Term Insurance policy gives your family a financial cushion to keep up with their expenses in case of your demise during the policy tenure.
Financial credibility
Youngsters starting their financial careers may require loans to fulfil certain dreams, such as owning a vehicle or buying a house. Your Credit Score could impact your ability to get loans, especially if you want long-term loans. Term Insurance can help improve your credit score.Term Insurance can also help your family pay the loans using the death benefit in case of your untimely demise.
Tax benefit
For many millennials, tax saving is a critical aspect of financial planning. You can utilise these savings to meet other financial objectives.The premium you pay on your Term Insurance plan is eligible for tax benefits up to ₹1.5 lakhs under Section 80C of the Indian Income Tax Act. Also, the death benefit given to your beneficiaries in case of your untimely demise is exempt from taxes under Section 10(10D) , subject to certain conditions.Furthermore, you can maximise this tax benefit by opting for certain riders (supplementary benefits). For instance, a tax deduction of up to ₹25,000 is available under Section 80D on premiums paid for term plans with a critical illness cover option. Also read: Why it’s important to buy Term Insurance plans first when considering Life Insurance
Key Takeaway
- Term Insurance is more suitable for millennials since it is a cost-effective way to financially safeguard your family members from life’s unexpected twists and turns.
- Getting started early will bag you discounted premium rates, proving fruitful in the long run.
- Not only does Term Insurance secure your family’s future, but it can also increase your chances of obtaining loans by improving your financial credibility.
- You can save a significant part of your income by claiming the tax benefits that come with investing in Term Insurance plans.
Also read: What should be the duration of your Term Insurance plan?
FAQS - FREQUENTLY ASKED QUESTIONS
Should millennials consider investing in Term Insurance even if they have other investments ?
Yes, investing in Term Insurance is essential regardless of other investments, as it focuses on providing a pure death benefit and ensures financial security for loved ones.
Is Term Insurance more affordable for millennials than other types of insurance ?
Yes, Term insurance is generally more affordable than other types of Life Insurance policies. It allows millennials to get a fairly large coverage at a lower premium cost.
How much insurance coverage should millennials consider ?
The coverage amount, or the death benefit in the case of Term Insurance, should be determined based on an individual's specific circumstances. As a millennial, you can consider factors such as your outstanding debts, future financial needs, number of dependents, and the potential financial impact on loved ones in the event of your death to choose an adequate coverage amount.
Should millennials opt for additional riders with their Term Insurance plans ?
Additional riders provide extra coverage and benefits beyond the basic death benefit. Millennials should consider their needs and circumstances to determine if any riders would benefit them. Common riders include critical illness coverage, accidental death benefit, disability income benefit, or waiver of premium, among others. Adding riders can enhance the policy's protection, but it's essential to evaluate the associated costs and benefits before making a decision.
Can Term Insurance plans be converted into other policy types later ?
Many Term Insurance plans offer conversion options, allowing policyholders to convert their term policies into permanent Life Insurance plans, such as whole life or universal Life Insurance, without undergoing medical underwriting. This is beneficial as needs can change in the future. However, not every insurer/policy may offer this option.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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