Life insurance policy is amongst the last things that the millennials think about. But, here are a few important things that every youngster must know about life insurance.
When you are young and just about starting your career, buying a life insurance policy may not be one of your priorities. Also, you may be thinking, ‘I am young and healthy, I don’t need a life insurance policy now.’ But, the irony is that the younger the investor, the better are the returns. Your age at the time of buying the policy and health condition are the two important factors that determine your premium amount. Why not get the life protection at a lower price while you are young than paying a higher price for the same protection when you are old?
If you are a youngster and are debating whether to buy a life insurance policy, here are five critical things you must know.
It is better to buy a policy when you are young
As a young and health millennial, you can use your age to your advantage and get a life insurance cover at an affordable premium. Additionally, if you are a non-smoker and have no pre-existing illness, you can get the cover at the lowest rate possible. As they say, ‘life is unpredictable,’ and it is better to be prepared for any contingency beforehand.
In the event of your untimely demise, there is a risk that your family may have no income source and suffer from financial hardship. But, with life insurance, you can secure your family’s financial future.
How much insurance do you need?
Life insurance must not be compared with any investment instrument, and it should not be a way to earn high returns. Remember, the primary purpose of insurance is financial protection. Having the right amount of cover is vital to help your family take care of their expenses and maintain a decent lifestyle when you are no more.
When it comes to choosing the right insurance coverage, experts suggest that you select a plan with a sum assured that is six to seven times your annual income. While there is no one-size-fits-all plan, you must choose your coverage amount based on your specific goals and liabilities.
Choosing the right type of insurance policy
Today, the insurance companies in India offer a wide variety of plans. While the term plan is the most basic form of cover and has the most affordable premium, it does not provide any investment returns. So, if you are looking for a pure protection plan at an affordable cost, term policy would be ideal.
If you are looking for an opportunity to invest in the money market and get valuable returns, while getting tax-benefits, you can consider investing in a unit-linked insurance plan. It provides an ideal investment opportunity if you want to invest in equity-linked instruments with minimal risk. Since the fund managers take care of the investment, you must only define your goal and allocate funds accordingly.
You need a life insurance cover at every stage of life
It is a general notion among people that life insurance is only useful for people who have kids and a spouse. But, the truth is, even if you are single, you need an insurance cover. You may have aging parents who you want to help financially, then buying a life insurance policy is a great idea.
If you have debts like home insurance, and you alone are responsible for the repayment, the insurance policy can help settle the debt from the insurance proceeds. There may be a family health insurance for diabetes or cancer, and you can be prepared for any such eventuality in the future with a life insurance cover.
The bottom line is that it is prudent to invest in a life insurance policy as soon as you start earning and being future-ready.