YOLO! So Do It Responsibly

YOLO! So Do It Responsibly
Nithin Johnson- HDFC Life- KlarifyLife
28 July 2022

Ask any 20-something about their plans, and you will find a starry-eyed individual planning to live life to the fullest. And why not? In your twenties, the possibilities are endless! Once we add to this a higher disposable income, increased life expectancy, and a general desire to delay responsibilities like marriage and childbirth, we have our typical millennial - invincible, with death being the farthest thing from their minds.

But jump to their early 30s, and millennials suddenly find themselves burdened with responsibilities - Home or student loan repayment, married and expecting, elderly parent care…

With these life milestones come the realisation that no matter how morbid it feels, one must always be prepared for an untimely demise and take steps to protect their family.

And yet, most millennials don’t take the most important step - getting term life insurance. I’ve often wondered why.

Having spoken to many millennials, this is what I’ve gathered so far:

They don’t realise how inexpensive term insurance is (and how it gets expensive with age)
● They think they have time
● They don’t feel its worth in the absence of any financial returns
● They have tried but struggled with jargon and complex processes
● And last but not least, they focus primarily on goal-oriented investments

Let me debunk the last one first - wealth creation, while important, cannot be the sole plan for an individual. That’s like buying an expensive car without keeping a spare tire. Even the best plan needs a solid backup plan because life is uncertain.

When tragedy strikes unexpectedly, one’s long-term wealth creation plan will be woefully inadequate during a crisis in the short term. A downside protection is needed to ensure their family’s financial stability in their absence.

There is another challenge: the life insurance landscape in India is filled with jargon and information overload. Insurance education must be simplified and made engaging to help millennials with better decision-making.

Here are a few simple things to know about term life insurance:

● Term life insurance is not a complex financial product
● It is basically the insurer’s promise that if the policyholder were to die before a certain age, their family will receive a relatively large sum of money
● Term life insurance is not expensive - it probably costs less than what one ends up spending on eating out!
● Premiums are much, much cheaper when one is younger. Term insurance is also easier to get when bought early, because the chances of one having lifestyle-related health issues, or chronic conditions like diabetes and hypertension are much less
● Tax benefits! (in case you still need convincing)

And while we’re on the topic, choosing the best plan involves many smaller decisions such as:

● The right policy term (up to what age would one wants to be covered? I’ve seen most folks covering themselves much longer than required)
● The right life cover (what is the amount one wants their family to receive if they passed away? Most folks forget about inflation and take an insufficient amount!)
● The choice of a nominee (who should receive the money?) and
● The payout frequency (how should they receive this money - as a lumpsum or in smaller amounts? This decision also depends on the financial literacy of the recipient.)

Insurers must help millennials understand term life insurance better and enable them to choose what’s best for them. They say youth is wasted on the young. I’d rather young people learn from the errors of the ways of older millennials and the generation before them and get term life insurance on time to ensure the well-being of their loved ones. You only live once - so do it responsibly!

Author is the Head - Strategy, Customer Centricity and KlarifyLife. KlarifyLife is an education and awareness initiative for the Gen Z and Millennials by HDFC Life.

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