New Delhi (India), February 28: When you are in your energetic 20s or ambitious early 30s, terms like life insurance, financial planning and retirement seem completely irrelevant. As a millennial just beginning your career, retirement is still 30+ years away!
You are focused on following passions, achieving dreams, and making new experiences. In the excitement of youth, life feels endless and invincible. Thinking about morbidity and securing loved ones financially is the last thing on your mind.
This blog post explains key considerations around customised life insurance specially relevant for millennials today to secure the future without waiting for retirement years. Please read on to know more.
What is Life Insurance?
Life insurance policies are contracts where you pay regular premiums to an insurance provider. In return, your nominated beneficiary (typically family) gets a pre-decided lump sum payment if you pass away during the policy term. This protects your loved ones from income loss or debt burden if the unforeseen occurs.
While no one likes imagining the worst, getting life covers when still healthy maximises the amount your beneficiaries receive. Premiums also stay lower when you’re young. So it’s wise to secure your future when you can.
Why Millennials Need Customised Policies
Millennials have distinctly different lifestyles and financial habits from previous generations:
– You likely switch jobs more frequently, chasing growth or entrepreneurial interests. So lock-in periods don’t suit you.
– Many among you juggle side hustles alongside regular employment for additional income. So, uniform covers don’t fit.
– Your peer group extensively discusses investment strategies. So wealth growth matters to you apart from insurance.
– Experience scores over material ownership in your purchase decisions. So, you expect flexibility in policy tenure or premiums.
This is why one-size-fits-all traditional life insurance only excites millennials a little. But tailored term insurance policies benefiting unique priorities do resonate more.
Key Policy Considerations for Millennials
Here are some aspects to evaluate in life covers optimised for millennial requirements:
Variable Premiums & Tenures
Earlier life insurance plans locked people into paying premiums for the entire policy tenure, like 15 or 20 years, which is difficult for millennials with variable incomes. But insurers now understand millennials’ need for flexibility.
They offer limited payment term life insurance plans that allow millennials to pay premiums for only 5 or 7 years to secure longer life covers for 15 or 20 years. This suits millennials better. Premium instalment options are also given yearly, half-yearly, quarterly or even monthly. This adjusts better to irregular or inconsistent incomes of millennials.
Wealth Creation
Millennials can select insurance plans that allow allocating some part of premiums towards investment funds. This ensures twin benefits – part insurance protection and part wealth creation to meet short and long-term money goals like home purchase, children’s education, wedding expenses, medical needs or even retirement planning.
All these financial needs can be tackled with dual advantage from a single plan – risk protection through insurance in case of unforeseen death along with growing wealth assuredly via market exposure.
It helps millennials maximise the value of premiums paid. One part secures life, while another creates a savings pool via funds investing in equity, debt and other instruments to build a nest egg through the policy tenure.
Waiver of Conditions
Previously, even slight delays in filing paperwork after the demise of the insured or minor unintentional breaches in policy terms and conditions due to lack of awareness would result in insurance claims getting rejected.
This would further add extreme financial hardship on already grieving families and beneficiaries who would have relied on policy payouts for stability.
Thankfully, today, several insurance plans offer waiver of conditions clauses which help settle nominee dues in good faith even on slight deviations from norms which don’t substantially increase risk exposure for insurers.
Policy Efficiency
Paying lower premiums seems attractive to millennials on tight budgets. But lower premiums also mean lower life coverage amounts assured for beneficiaries. There is always this inverse relation at play.
For instance, Person A pays ₹10,000 annual premium for a ₹1 crore life cover, while Person B pays ₹15,000 annual premium for a ₹1.5 crore cover. If something happens to them, Person B’s beneficiaries get the advantage of the extra ₹50 lakh coverage even if they paid a higher premium.
Hence, unthinkingly opting for cheaper premium plans without correlating with amounts assured can leave families financially vulnerable. Millennials must balance premium affordability with a sufficient level of risk coverage to secure their families’ current and future financial needs using online policy comparison calculators.
The Bottom Line
Life insurance seemed unnecessary in your youth, given so many expenses and savings goals already at hand. But as millennials grow older, get married, and have kids – unexpected risks also compound. Getting tailored life covers addressing unique requirements hence makes prudent sense today.
Ideally picks options allowing bundling protection, wealth acceleration, premium flexibility and hedge clauses in case of small policy deviations. This balances long term safety for beneficiaries with wealth creation for self without overstraining limited earnings years budgets.
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