Are you an Indian millennial? If so, you're part of a generation that has faced unique financial challenges. Economic downturns like the 2008 financial crisis and the recent COVID-19 pandemic have made building wealth a fairly challenging task. Add student loans, rising living costs, high housing expenses, and stagnant wages to the mix, and it's no wonder that many of us feel financially stressed. But there's good news: life insurance can be a smart way to secure your financial future. 

Why should you be thinking about life insurance now

If you’re a millennial, you are anywhere between 27 and 42 years old. This means that a large chunk of you aren’t exactly thinking about your death. However, life is unpredictable. Therefore, it is essential to be prepared for eventualities, especially when it comes to your finances. 

Affordable Premiums

As a younger individual, you qualify for lower insurance premiums. Buying insurance early allows you to lock in competitive rates. Additionally, there are tax deductions available under Section 80C of the Income Tax Act that further incentivize life insurance. This means you can protect your financial future without breaking the bank.

Wealth Generation 

Life insurance plans offer a unique opportunity for wealth generation because insurers offer capital growth and large maturity amounts. You don’t just get what you save up; you get much more. 

Financial Protection for Loved Ones

Life insurance goes beyond personal financial security; it ensures that your family members won't face financial hardships in case your life is cut short due to unforeseen circumstances. This is especially crucial if you are the sole breadwinner or have outstanding debts.

When to buy life insurance

Life insurance may not be necessary – even if it's a good idea – for everyone. However, there are specific life stages when it becomes absolutely critical. Let’s look at situations where you must make it a point to buy an insurance policy:

Single, with dependent parents and/ or siblings: 

If you're young, single, and debt-free, life insurance may not be a top priority for you. However, if you've co-signed a loan or financially support family members who rely on your income, insurance is fairly critical for you. 

Married, with a dependent spouse: 

When you're getting married, it's an ideal time to discuss life insurance, especially if your spouse depends on your income.

If you have high debts or live in a community property state, life insurance can provide essential financial protection.

Married, with children:

Having kids often necessitates life insurance. Consider a policy worth 10x your annual pay to secure your family's future.

Are you thinking, “But I have insurance through my employer”? 

While employer-provided insurance is beneficial, it's not always portable. It's a valuable add-on, but it may not fully cover your needs if you change jobs. Consider it as a supplementary measure rather than your primary insurance solution.

Additionally, most employers in India cover you with medical insurance and not life insurance. Medical insurance is another type of insurance that is advisable for most people because you pay an affordable annual sum that gives you a financial safeguard if you are hospitalized due to a medical emergency during the one-year policy period. This insurance has to be renewed annually and if you are not hospitalized, you forgo your premium. 

It is entirely different from savings insurance that goes to your family upon your death. Both types are essential. This brings us to our next point – life insurance too, has several subtypes. 

Choosing the right life insurance: Types of insurance policies 

Understanding the basics of life insurance is crucial to making an informed decision. There are three distinct types of insurance, and you must be sure to make your choice based on your budget, requirements, and risk appetite. 

The three types of Life Insurance are:

1. ULIP Insurance Policy
   Top features: 
   1. This policy combines investments with life coverage.
   2. It offers flexibility in selecting investments and payment tenure.
   3. ULIP is ideal for those with a higher risk appetite who want to explore investment opportunities while ensuring financial security.
      
      Question to ask yourself (or your financial advisor): 
      Would I be better off buying an endowment policy for savings and investing in mutual funds to pursue high-risk, high-reward capital gains? 
2. Endowment Policy or Savings Insurance
   Top features:
   1. An endowment policy provides a lump sum payout upon policy maturity or in the event of the policyholder's death.
   2. It's a low-risk investment option suitable for long-term financial goals.
   3. You can also explore additional coverage options to tailor the policy to your specific needs.
      
      Question to ask yourself: 
      Will I be able to pay my premiums comfortably? 
3. Term Insurance Policy
   Top features:
   1. If you're looking for pure life cover without savings or investments, term insurance is an excellent choice.
   2. It offers a high sum assured at affordable premiums.
   3. It comes with tax benefit under Section 80C.
      
      Questions to ask yourself:
      1. How certain am I that I will not survive past the policy term and forgo all the capital I have invested?
      2. Would I be better with endowment insurance that will be granted to me upon maturity or my loved ones upon if my death occurs before maturity

Question to ask your insurance provider: 

Can I transfer the policy to permanent insurance at any point? 

How To Determine Your Coverage Amount

Do your own calculation 

To determine the right coverage amount, consider your financial needs:

Think about how the payout will be used, such as covering funeral costs, paying off the mortgage, funding your children’s education, covering daily expenses, and so on. Do not forget to factor in inflation.

Use a free online calculator 

Online calculators can help you estimate your coverage needs accurately.

To sum up:

Insurance sounds confusing at first glance, but with a little research – like this article you just read – you will understand insurance much more clearly.  Making informed decisions is crucial, so ensure that you understand what you are buying completely. Consider seeking advice from financial advisors or insurance brokers who can guide you through the process. 

With affordable premiums, opportunities for wealth generation, and the assurance of financial protection, life insurance is a vital step toward achieving financial stability. 

In conclusion, life insurance is a smart way for you to secure your future and build wealth, despite the many problems of being a millennial. 

Don't wait; start investing in life insurance today to secure your tomorrows. Your financial future is in your hands, and life insurance can be your trusted ally on this journey to prosperity.

Aviva not only gives you the convenience of buying insurance online but also helps you get a thorough picture of what you are buying. Read more blogs like this one, talk to our customer support team, or browse policies here.

AN Oct 32/23 

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