For a millennial, it is greatly advisable to start with a Term Insurance that would guard their family against various insecurities.
By Pankaj Chauhan
Term Insurance is unique as it is available to all salaried and non-salaried population. In a time of high risk, where the incremental income of millennials who make up 34 per cent of the country’s population is sliding down like a racing pigeon, term insurance comes as super financial security. Term insurance is one of the protective policies that will help keep you rolling even on a rainy day. Therefore, millennials instead of saddled by loans need to plan for a Term Insurance which is the best choice for affordable coverage. Let’s look at the benefits of buying term insurance.
1. Cost-effective and high benefits
Since millennials are relatively a young population, age becomes one of the key yardsticks to calculate the premium of the insured. The term insurance is cost-effective and encourages the insurer to purchase it early and on the other hand, financially relieves the insurer to purchase early. The premium thereon remains constant, even if the risk profile of the life insured changes. It is also one of the cheapest of all the insurance options in the market. At nominal premium amounts, cover as high as Rs 1 crore can be obtained. This cover can yield a sum insured 5 times of the annual CTC.
2. Family coverage
Millennials are not alone but they a family back home. So, a Term Insurance can be a financial cushion for the millennial’s dependents in case of any loss, expense or tragedy. Unit Linked Insurance Plan (ULIP) is integrated by non-conventional insurance companies, which provide dual benefits of insurance and investment under one plan. For a millennial, it is greatly advisable to start with a Term Insurance that would guard their family against various insecurities.
3. High Disposable income
Most millennials fall under the unmarried category and their expense, mostly family, would proportionally be low. Adding, most millennials choosing later marriage is another factor that has led to an increase in disposable incomes. With fewer liabilities at hand and more disposable income, a term insurance cover becomes a sensible investment for the future.
4. Improves financial credibility
Term Insurance can act as a buffer during any purchase against any liabilities such as home loans or car loans or any other. The sum insured payable by the insurance company can be used to pay off the pending loan requirements of the loaner. This, on the other hand, can also be used to leverage at the time of purchasing the loan. Creditors are comfortable in issuing higher loan amounts to debtors with term insurance since the risk of loan non-repayment is mitigated. Also, if a client is a millennial shopper and frequently buys products on EMIs, then having term insurance can also improve CIBIL rating.
5. Tax benefits
A Term Insurance policy provides income tax benefit under two different sections of the Income Tax Act.
Under this section 80 (C) of the Income Tax Act, an insurer can avail tax benefit on the premium paid towards the policy. The premium paid towards term insurance, up to a maximum limit of Rs 1.5 Lakhs, are eligible for Tax exemption U/S 80c of IT Act 1961.
Under Section 10(10D) 1961, the maturity benefit offered under Term Return of Premium Plan (TROP), are also eligible for tax exemption.
Term Insurances are a rewarding policy for millennials as it not only saves them from financial burden but also an emotional burden. Multiple companies are on the forefront to avail this policy with additional benefits. Since millennials presence is found widely on the digital landscape, these options are made easily available online. Wait no more!!
(The author is MD & CEO, EPOCH Insurance Broker)