Individuals in their twenties are a level above the carefree teenage years and mature enough to take on responsibilities, one at a time. They have landed their first job or probably made a couple of switches and have already started thinking about their dream vacation, latest automobile or a house in the later years. In the rush to tick all the boxes, what often goes missing is planning the finances responsibly irrespective of the limited savings. It is therefore critical to take the first step and choose the right places to invest the money, and insurance is one such product that becomes an unavoidable investment.
The pandemic shone a light on the dire need to safeguard oneself and get adequate life cover for the dependents against any unforeseen event. A study by the International Journal of Commerce and Management Research states that individuals below the age of 30 years prefer investing in life insurance policies, and also have the income potential to do so. EY highlights that a higher number of young individuals is buying insurance policies through digital platforms. In the last five years, at Exide Life, the share of policies purchased by individuals below the age of 30 was approximately 24 per cent.
Today, the workforce is young and savvy in terms of accessing investment options. Unlike the previous generations, they enjoy more convenience while choosing their investment avenues depending on their life goals. The digital boom has opened multiple avenues for customers, especially for the younger generation that has access to technology on their fingertips.
So, here’s why an insurance policy should be a must in every financial products’ list:
• Discipline In Investment
This generation is associated with characteristics such as the need for instant gratification and making bold choices. It is no doubt that millennials have more opportunities in terms of going up the career trajectory, and with this rise, there is an inevitable trap of over-consumerism that one is likely to fall into. So how to protect oneself from this? The answer lies in being disciplined. Insurance policies along with other financial planning tools can help achieve this discipline. For example, term insurance is for a set period with a certain premium for a fixed sum assured for the entire tenure of the plan. This not only keeps a check on the individual’s spend but also keeps the protection switch on for the dependents.
• Early-Bird Benefits
When individuals are young, their health is in the best shape and they’re ready to overcome any challenge that comes their way. Buying term insurance at a young age is the best deal that one could probably make. As policyholders grow older, they become susceptible to multiple medical conditions which will then require a payment of higher premiums. It could also be a challenge to get new life insurance in the later years for a number of reasons such as occupation or a history of health issues.
• Countering The Risk Factor
Individuals in their twenties lead a fast paced and mobile life and are prone to a host of risks. While it is vital to purchase adequate life cover, adding on riders to the basic term plan acts as a cherry on the cake. An insurance rider is an additional insurance cover such as a critical illness, accidental, child support, etc., which could be added to the base policy to grab extra benefits. Doing so also ensures that the financial future of the policyholder’s dependents is secure because the sum can be used to pay off any liabilities that the life assured may have and the riders will take care of the rest.
• Exemptions From Tax
Unlike investment avenues such as mutual funds (non-ELSS) and direct stock investing, insurance policies give the advantage of saving taxes at the time of paying premiums as well as while availing the maturity benefit. Premiums paid towards insurance policies are eligible for tax deduction under Section 80C of the Income Tax Act, 1961.
It is implicit that buying an insurance product is beneficial in many ways and it is advisable to re-evaluate policy requirements with each life change and then pick the right product. So, while they say ‘age is just a number’, that’s not quite true when it comes to insurance. The sooner you begin, the better it is.