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Why Every Millennial Must Invest in a Term Plan?

Generation X also called as millennials (born between 1981-1996) are often confused about how to spend their excess Income. They are either busy partying, traveling or investing in a start-up with their hard earned money. With huge risk appetite, they often land up in some financial issues which they later repent. One of the basic investment that they often neglect is buying a good term plan. At times they may not be aware of the fact that if they invest at this age they may get the lowest cost of the premium. As compared to the investment amount, the risk covered is exponential.

Investment plans like term cover the entire risk of the life of policyholder. In the case of the death of the insured, his beneficiary gets the entire claim. In most of the cases, the nominee of the policyholder is their spouse or close family member. Benefits of policyholder survival can also be availed in some specific plans.

Financial Risks of Millennials

  • Lack of Financial Planning

    Millennials are most careless in planning their finances. Because of this lack of planning they get into financial crisis often. This happens mainly because this generation is in habit of spending more and saving less. This kind of casual behavior may prove out to be quiet risky.

  • No Savings

    Every individual must save at least 10-20% of their Income for managing any future urgencies. Often the need for saving is understood when people face a crisis. It’s always better to invest young to manage any kind of risk.

  • Taking unsuitable plans

    People tend to take unsuitable policy because of lack of awareness of the right ones. They must always try to make an informed decision. It can be possible by acquiring knowledge of all the policies.

  • Wastage of Money

    Worst case is when people are not aware of what to do with their money. Their hard earned money either lie lazily in the banks or get wasted elsewhere. Right investment strategy can always come to their rescue. This habit is more common in the millennials.

Why Should You Choose Term Plan?

Life cover

The best advantage of the Term plan is it covers the risk of life. You can always secure your family with this plan. In case something happens to you, your beneficiary gets the amount according to the sum insured.

Rider benefits

Along with the investment in the term plans, there are lots of additional riders that can be taken. These riders cover risk besides death. Some of them are related to accidental disability or critical illnesses. By paying just a nominal amount we can cover more risk through these riders.

Higher return on investment

Term Insurance plan offers much more Sum Insured amount than the Investment. Sum Insured is the amount that a claimant gets at the time of the death of the policyholder. With the minimal investment of just 10-20% of their salary, they can get 25-30% of the coverage.

Buying flexibility

Term plans can be easily brought through online marketplaces. With the ease of online payments, the policy can be received within a few minutes. There are many channels of buying on online platforms itself. Most preferred out of all is the online comparison sites often referred to as web aggregators.

Minimum investment

Term Investment is the lowest investment, to begin with. You can start at as low as Rs.10 per day. Younger you are lower you need to pay. This is a basic investment that is available at a very low cost.

Benefits of Investing Young

The best usage where your funds can be used is in Investment that can cover life risks with the best sum insured amount. Term plans are usually the best platform anyone can invest. It starts with low investment but can give high coverage. There are many added advantage an individual may get while investing in such plans, few of them are as follows.

  • Low cost of the premium

    Younger you invest, lesser is the cost of the premium. This is because young people have a high life expectancy. They got a low risk of life, because of this there cost of the premium is less. Within the age gap of millennials also the amount of premium differs, as can be seen from the case below.

    Case Study: Four friends, all millennials with the age of 25 years, 30 years, 32 years & 37 years plans to buy the insurance cover with the sum insured of Rs. 50 lacs. They all are non-smokers but the amount of premium they end up paying differs because of the difference in their age. Their amount of premium with one of the leading insurance firm is demonstrated in the table and chart below.

Sno

Age of person

Monthly Amount of premium

1.

25 years

Rs. 435

2.

30 years

Rs. 474

3.

32 years

Rs. 537

4.

37 years

Rs. 657


Illustration : Age vs. Amount of Premium- Comparison

  • Better term plan

    Young people may have lots of products to choose from. They can check about various term insurance players and plans offered by them. Some plans are customized for millennials to assist them in availing best product.

  • Higher policy tenure

    All the policies terminate after a certain age irrespective of when you start. The tenure of policy varies between 60 to 75 years. Someone starting any policy at the age of 25 years, can continue policy till 35 years, as it expires as someone turns 60. During this time period if any eventuality like death or accident happens can be covered easily. People with higher age will have less tenure for policy.

  • Better sum insured

    If you start young you can also try to get the best coverage. The amount of premium will also be relatively less.

  • Tax savings

According to section 80 c & d, the amount invested in term plans can be saved from taxes. By such investments, we are not only saving the taxes but utilizing this amount for our betterment.

How to Choose the Best Plan for Yourself?

  • Checking premium through online calculators

    Best way to choose a good plan is by visiting any of the online comparison sites. They got efficient online calculators using specialized algorithms that can provide the desired quote. It can be easily used by entering a few details. Some of the details it needs are.

  1. Your Age

  2. Smoking Habits

  3. Your City

  4. Gender

    After entering all these details you can easily get quotes from all the leading players. You can choose the plan as per your suitability.

  • Comparative analysis

    These policies can be easily compared online by checking all their features. Comparison helps in taking an informed decision.

  • Setting up the financial goals

    Once we are clear about our financial goals its easier to choose the investment plan . We can select the policy that meets our financial needs.

  • Choosing the policy term

    Policy term varies from 5 to 40 years. We can choose the plan as per our requirements. Some Insurance policies provide lesser policy term, some higher. We can choose the plan that suits us.

  • Selecting the suitable plan

    You can always select the plans as per your specific need. All the leading players got more than one plan to choose from. The plan is designed as per our specific needs and requirements.

Leading Insurance Players & Plans

Sno

Term Insurance Player

Plan-1

Plan-2

1.

ICICI Prudential Life Insurance

Raksha

iprotectsmart

2.

SBI Life Term Insurance

eshield

smart shield

3.

PNB Metlife

Mera Term plan

4.

Aditya Birla Capital

Digishield plan

5.

Max Life Insurance

Term Plan

6.

Bharti Axa Life

Online Protect

7.

HDFC Life

Click2 Protect Plan

8.

LIC

eterm

9.

Aegon Religare

iterm

10.

Tata Sampoorna

i Raksha

  • Flexibility of Payments

    We can also select the policy that provides maximum flexibility in the payments. Many policies provide the ease of payment in the interval of months, quarters, bi-annually and annually. We can choose the term insurance players that offer the maximum flexibility. It can help you pay the premium as per your convenience.

If you are millennium and planning to invest this is the right time.

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