A millennial is a generation that is also known as Generation Y or Gen Y, and these are the demographic cohort following Generation X and preceding Generation Z. Typically, they are born between 1981 and 1996.
Now moving on to the principal theme of the article.
Is Insurance Important for the So-Called Cool-Gen – the Gen Y?
Well, yes. Life insurance forms a critical component for any millennial who is looking to build a healthy financial future.
Millennials are known to become one of the wealthiest generations of all with an improved standard of living and much more. However, not much has been done by the generation towards risk coverage owing to their busy schedule.
Before we delve deeper into the kind of plans that a millennial should consider for buying, let us discuss the importance of insurance.
Why is Insurance important for Youngsters?
- First thing, always remember every insurance coverage with an insurance premium that needs to paid to keep the policy alive.
- Second important thing is that the insurance premium is positively correlated with age. Thus, with rising age, the premium paid also increases. Therefore, the best time to invest in a life risk cover is when you are young and healthy. While at school if you can opt for an insurance policy, nothing like it.
Buying life insurance and health insurance is not only important from an external point.
For example, you would surely purchase a property, and thus you would have a mortgage loan. In such a scenario, you opt for an insurance policy to ensure that your loved ones are not overburdened with the home loan installments.
But if you are choosing for insurance only based on such factors, then it is wrong.
Insurance policy also depends on the personal factor such as your health, financial well-being, social security, the lifestyle of family members, number of people earning in the family, number of dependents and many more.
Thus, to ensure that the style of life continues even in your absence, insurance forms an essential component of the financial portfolio.
Which Policies Will Work?
No. Clearly, with a plethora of options to choose from, you are bound to get confused.
Some companies provide you with various types of insurance policies with each of them serving a different need. Thus, it is essential that you choose the right plan according to your need.
Let us see some of them in detail:
1. Term Plan
- This plan covers your financials against untimely death.
- You get high sum insured with a low premium and is one of the most prominent programs to opt for.
- It is a pure play risk cover plan and not an investment plan where if any mishap happens during the period of coverage, your family is paid with the sum insured.
- On the other hand, if you survive by the insured period, your premium that is paid over the years lapses.
2. Unit Linked Insurance Plans (ULIPs)
- ULIPs are more of an investment plan and insurance policy combined where the investment risk is on the individual.
- An individual can invest in this plan to generate returns while enjoying insurance coverage along with tax benefits.
- Long-term investors are looking to secure savings at the same time, ULIP is the plan to opt.
3. Endowment or Guaranteed Savings Plan
These policies are for people who are not willing to take an investment risk. In this case, you get a guaranteed return with a fixed rate or a return based upon reasonable expectation along with insurance coverage.
These are designed to meet specific goals such as a child’s education or wedding. If the policyholder passes away during the plan, the remaining premium is waived off, and the nominee is paid with sum assured as well as the top up sum assured.
How to Pick The Right Policy?
Once you have finalized on your requirement, the next step should be to buy it.
The earlier you buy, better it will be as your premium will be accordingly less. For example, Rs 1 crore term insurance plan subscribed at 35-year would come at a premium of Rs 10,000 per annum, and for a 30-year old it would be cheaper at Rs 7500 per annum.
To Wrap It Up
As a millennial, one of your goals would be early retirement and financial freedom. Thus, it will be difficult if you do not plan for your economic well being correct.
You need to realize the importance of scheduled investments that remain critical for the young generation.
While in your 20s, you are bound to make mistakes, but then this is the age where you learn the basics so that the knowledge can be put to use as you create wealth, because remember:
“Insurance is the only product that both the seller and buyer hope is never actually used.”
Disclaimer: The views expressed in this post are that of the author and not those of Groww