Why Millennials Should Invest in Term Insurance

In India, almost 65% of millennials opt for Life Insurance as their long-term investment vehicle. However, in 2024, the oldest millennials will be around 44 years old. This means that they will not get low premium rates if they try to buy a new life insurance plan today. But this does not mean that life insurance is out of their reach! If you are an older millennial who has not obtained any form of life insurance yet, then term plans are an ideal choice for you. They provide peace-of-mind in the long term and secure your loved ones from financial difficulties in your absence.

Younger millennials will also find term insurance appealing because of its simplicity and affordability. Younger people tend to have more affordable premium rates, which means that it is better to invest in these policies early on in your life and career, when you have fewer financial commitments/responsibilities.

In either case, it is imperative that millennials understand the role that term insurance can play in their overall financial plans. It provides a layer of security and comfort in the knowledge that they are ready for any eventuality that may arise in the future.

In this blog, we’ll discuss why millennials should consider investing in term insurance plans.

Why Millennials Should Invest in Term Insurance?

Here are some reasons to invest in term insurance as far as millennials are concerned.

Financial Stability of Your Family:

Term life insurance provides your loved ones with financial security so they can continue living the lifestyle they want and accomplish their objectives in life even in your absence. The death benefit, which is the amount assured paid upon the policyholder's passing, can be applied to several things, including your child's schooling/higher education, your spouse's retirement, or the purchase of a property.

Additionally, the amount guaranteed can be utilized to pay off any outstanding loans, which will lessen the financial strain on your family. While many young people have education loans to repay, you are unlikely to have bigger debts like home loans in your twenties. However, later in life, in the event of the unfortunate demise of the policyholder, the family may have to bear a heavy financial liability in case of mortgages and other big-ticket debts. Hence, a lump sum term insurance payment may help in settling the remaining loan balance, thereby lowering the financial burden on the family.

With term insurance, you can choose the level of coverage according to your earnings and out-of-pocket costs. Consequently, you can choose to invest the maximum amount that your age and salary would allow—a quantity that would otherwise require several years to build up through savings.

Affordable Premiums:

Term plans have lower premiums than other kinds of life insurance, so you can get a lot of coverage for your family's financial security without having to pay a lot of money simultaneously. The main reason why term insurance is so inexpensive is that it doesn't contain an investment component. Unless you have chosen a plan that does, these plans don't provide maturity or survivor benefits.

Because term insurance has affordable premiums, investing in it when you're young can end up being a smart financial move. The primary determinants of the term insurance premium are the applicant's age and overall well-being. Younger candidates in their twenties or thirties typically have better health than older applicants, which translates into cheaper premium costs. Moreover, younger people are less likely to fall grievously ill, which is another factor contributing to the reduced cost of term life insurance policies purchased early. For these reasons, it is best to buy term insurance early in life to benefit from these financial advantages.

Lock the Low Premium Amount:

When you buy a term plan, your premium doesn't change over the course of the policy, be it a period of 10, 20, or even 50 years. Consequently, over time, purchasing term insurance at a young age saves a significant amount of money as a result.

Let us consider an example. Assume that a 29-year-old buys a 30-year term insurance policy with a sum assured of ₹1 crore. The policy has an annual premium of ₹10,000. For the full 30-year policy term, the individual will pay a total premium of ₹3,00,000 (₹10,000 x 30), as the premium amount, irrespective of any health issues they develop later in life.

Tax Benefits:

In addition to the advantages already listed above, policyholders also receive tax advantages. The premiums paid for life insurance policies throughout a financial year are deductible from the taxpayer's total income under Section 80C of the Income Tax Act, 1961. For every financial year, premium payments up to Rs 1.5 lakhs are eligible for this deduction. As a result, you can deduct the full amount of your annual premium payment from your income, thereby lowering your tax obligation. You can benefit from a lower tax burden during a critical stage of your life by getting term insurance early.

Conclusion:

For millennials, term insurance is a financial safety net that helps them achieve financial peace of mind. They can safeguard their families financially by choosing adequate life coverage, while enjoying reasonable premiums for the same if they purchase term plans early on. This aspect alone makes term insurance critical for financial health, and millennials should not neglect the same.

 

Aastha Mestry - Portfolio Manager 

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.