Buying life insurance should not be an ad-hoc event, rather one should correctly estimate the insurance need based on one's goals and then purchase insurance plans.
For most millennials, buying life insurance is not on their priority list. However, if they have financial dependents, having adequate life insurance coverage even for working adults is important. What fits the bill at a young age is a term insurance plan which is a pure protection plan that helps secure the financial future of one’s family in case of an unfortunate event with the policyholder. Buying life insurance should not be an ad-hoc event, rather one should correctly estimate the insurance need based on one’s goals and then purchase insurance plans.
There are life insurance calculators available on the Web that can help one to calculate the insurance coverage amount. But life insurance needs keep changing as one ages and, therefore, a review becomes equally important so as to avoid under-insurance at any life stage. There could be goals to achieve such as kids’ education, buying a home etc. Parag Raja, MD and CEO, Bharti AXA Life Insurance, shares his guidance with millennials who could be unmarried or married with or without kids on how to take a life cover at different life stages. Excerpts:
Working Unmarried Millennial
For a working unmarried millennial, a term insurance plan will help secure your parents financially. If you have any loan like an education loan, in case an unfortunate event occurs, the claim money can help your parents pay off the loan.
Understanding that one would have just started earning and there are various aspirations that millennials want to fulfil like buying a smartphone, taking a trip with friends and more, a great entry point could be through a One Year Term Plan.
It’s a plan wherein one can subscribe to a term plan for a year at an extremely low premium rather than commit to a plan for 20-30 years or more for a higher premium amount. It offers the much needed personalization that a millennial’s lifestyle demands today. The plan is completely customizable to their needs. Additionally, as one moves along in life, one has the option to add or change the nominee to one’s wife and children as well. Term plans offer great tax benefits as well.
Married millennials are filled with responsibilities – they might have a home loan, car loan, elderly parents or a child on the way. Hence, term insurance becomes important to help secure your family’s financial future and cover for loans and other liabilities.
Married couples can opt for a joint life policy which covers both the partners under a single plan. Additionally, if one is looking to protect themselves as well as grow their wealth for long term life goals, ULIPs (Unit Linked Insurance Plans) or Guaranteed income plans could prove to be a beneficial way.
The selection criteria between a ULIP or a guaranteed income plan purely depends on two things – the returns you are looking for and the risk appetite of an individual. If one is looking for high market linked returns and has a higher risk appetite, ULIP is the ideal choice. However, if the individual is risk averse, a guaranteed income plan can become the ideal choice.
Millennials with Kids
For Millennials with kids, a term life insurance policy is a must have if you have young children. In case an unfortunate event occurs, the claim money for a term insurance will help the family maintain their lifestyle, cover loans (home, car etc.) and ensure that money is not a roadblock for the family to achieve their dreams.
Further, you can also look to invest in ULIPs or guaranteed income plans which provides a protection cover as well as helps to grow your wealth in order to meet your child’s future needs like education or buying a bigger car/house and more.