Millennials are people who were born from 1980 to 1990. It means they are in their late 20s and early 40s. Many of them are married or about to be married and start a life. They are in the stage of buying homes and making their career in the desired field. 

This is the perfect time for them to start financial planning for the future. Insurance policies are important for these people to avoid any financial crisis they may face. Buying a life insurance plan is one of the ways to protect oneself and loved ones from financial distress.

Why Millennials Need Insurance

Financial Security: Insurance offers financial protection against unexpected events such as accidents, illnesses, or the death of a breadwinner. This ensures that millennials and their families are not burdened with sudden financial crises.

Health Coverage: With increasing healthcare costs, having a comprehensive health insurance plan is essential. It covers medical expenses, hospitalization costs, and even routine check-ups, ensuring millennials can focus on recovery without financial stress.

Life Insurance: Life insurance is not just about providing for dependents after death. It can also be an investment tool, offering benefits like tax savings, wealth creation, and a source of funds in emergencies.

Property and Asset Protection: Owning a home or a car comes with its own set of risks. Home and motor insurance protect these valuable assets from damage or loss, ensuring that investments remain safe.

Also Read: 5 Mistakes to Avoid While Buying Term Life Insurance

Best Insurance Plans for Millennials

Life Insurance Basics

An individual must start looking for life insurance policies if he or she is a millennial and has never looked into a life cover. Life insurance is a contract between the policy buyer and the life insurance company. The policy buyer pays the premium to the insurance company and the insurance company offers life coverage to the policy buyer. The insurance company also offers death benefits to the nominee of the policy buyer in case he dies before the maturity of the plan.

Who Sells Life Insurance Policy?

One may purchase such a policy from an insurance agent or a PoSP agent. They both sell the life insurance policy to the buyer. PoSP is another type of license which the Insurance Regulatory Development and Authority of India (IRDAI) introduced in 2015 to meet the life insurance demand of people. An individual may contact the PoSP insurance agent and buy the life insurance policy of the company he wants. A PoSP agent sells the types of life insurance policies of many companies. The normal insurance agent also sells the life cover. However, he is limited to only one company.

Types of Life Insurance Policy

A PoSP agent and an insurance agent sell different types of life cover plans to people. Here are the types of plans that a millennial may buy from the PoSP insurance agent.

ULIP Insurance Policy and Returns

ULIP or Unit Linked Insurance Plan includes both insurance and investment. One part of the premium that the policy buyer pays goes towards the payment of the investment plan. At the same time, the other part goes towards insurance coverage. A policy buyer may use the ULIP for various purposes. This includes life insurance, wealth creation, payment of education fees, building funds for retirement, etc. People generally buy ULIP to provide benefits to their families or children. The dependent receives the payment after the death of the owner in the ULIP plan.

Types of ULIPS

ULIP offers both insurance and investment plans. One part of the premium goes towards insurance. At the same time, another part goes towards investment. However, there are many funds in the ULIP that the policy buyer may consider to invest.

Here are the types of ULIPS that the policyholder must understand before buying the plan.

  • Equity funds: Equity funds are the stocks of various companies. The policy buyer may invest the second part of the premium in equity. However, he must note that this fund attracts more risks as compared to other funds.
  • Debt fund: The policy buyer may choose a debt fund if he wishes to reduce the risks. He may allocate the second part of his payment to this fund which shall be invested in government bonds and security. This fund attracts less risk as compared to equity funds. However, the returns are lower than the return on equity.
  • Balance fund: Balance funds are those funds which include both equity and debt. A policyholder may allocate his payment to this fund if he wishes to balance the risk and returns.

The policy buyer should understand the different types of funds and choose one according to the risk and returns.

Term Life Cover

The Term life cover allows the policy buyer to purchase the coverage for a specific period. It varies between 10 to 30 years. The policy buyer may name a nominee who shall receive the policy amount if the policy buyer dies before the end of the plan. However, the policy shall no longer be in force when it ends after paying the nominee.

The term life cover is the lowest-priced policy. There is no barrier to entry into this policy. A millennial may have a lot of responsibilities to fulfil. Therefore, he may buy the term life cover and secure a safe future for his family.

The term life plan also allows the policy buyer to add more coverage after some time. The policy buyer may also convert the term life cover to a whole life policy. This means that the plan shall provide coverage for the entire life of the policy buyer.

An individual may find many companies that offer term life cover. He may contact an insurance agent if he wishes to buy the term life plan of a particular insurance company. At the same time, he may also contact a PoSP insurance agent if he wishes to know the features of different insurance companies. This is because a PoSP agent sells insurance policies for many insurance companies.

Whole Life Cover

Whole life cover is a permanent life insurance plan. The policy offers coverage to the policy buyer for his entire life as long as he pays the premium. This plan also offers a cash value component. It means that the policy buyer may access the cash value as a loan and pay the additional premium for more coverage. However, the whole life plan is more expansive as compared to the term life plan. It is because of the length of the coverage.

Factors Affecting Life Insurance Premium

The price of a life insurance policy depends on many factors. The insurance company adopts different and unique methods to decide the premium that the policy buyer needs to pay to buy the life insurance policy. The premium that the policyholder shall pay depends on the following factors.

  1. Age - The age of an individual plays an important role in deciding the price of the policy. Young people such as millennials live longer than old people. It means they are likely to pay the premium for a long period. This also means that there is less risk to the insurance company that it shall pay its liability. This results in lower the cost of the policy. The millennial in this case may have a lower premium as compared to the old age people who are more prone to risks.
  2. Medical history - The medical history of the policy buyer also plays a major role in deciding the cost of the policy. The insurance company conducts the medical exam before issuing the policy. The report of the medical exam allows the insurance company to decide the premium of the policy. A policy buyer needs to pay less premium if his medical history meets the expectation of the policy buyer. In other words, if the policy buyer does not have any medical history, then the insurance company or PoSP agent shall charge less premium. However, they have to pay more charges if they have a medical history. This includes cancer, heart disease, diabetes and other similar health disease. The policy buyer shall pay more premium if the risk is greater. He shall pay the less premium if there is no or minimal risk.
  3. Occupation - The occupation also matters when it comes to calculating the premium of the life insurance policy. An individual with a high-risk career shall have to pay more coverage as compared to a person with a low-risk career. For example, an individual needs to pay more coverage if he is a pilot, construction worker, police officer, firefighter etc. In addition, the insurance agent may decline to offer life cover if the job of an individual is too dangerous.
  4. Gender - The life cover premiums are low for females. At the same time, it is high for males as the life expectancy for women is longer than the men.
  5. Lifestyle - The life cover premium also depends on the lifestyle of the policy buyer. An individual may have to make more payment for the insurance if he engages in dangerous hobbies. This includes mountain climbing and skydiving. People who drink heavily or smoke daily also need to pay more to buy the policy.
  6. Policy Type - Some policies are affordable while some cost too much. For example, a person has to pay less premium if he buys term insurance coverage. At the same time, he has to pay more if he buys universal and whole life cover.

Benefits of Buying a Life Insurance Policy

Here are the benefits that one may get after buying a life insurance policy from an insurance agent or a PoSP insurance agent.

  1. Looking After Dependent - A family man needs to take care of his family members. The members are dependent on the family man to fulfil their financial needs. However, the family member or dependent may not be able to live in the absence of the family man. This is why an individual must buy a life insurance policy. The policy looks after the dependent after the death of the policy buyer. An individual may secure a great future for his family by buying a life cover plan. It shall offer financial security to the family member if the policy buyer dies.
  2. Debt - No one wants his family to deal with financial obligations during a crisis. However, people may have to pay the debt if they have taken it from a bank. This includes home loans, credit card loans, personal loans, auto loans etc. A person may pay such a loan if he has a life insurance policy.
  3. Long-term Goal - The life cover plan also helps the policy buyer to fulfil the long-term goal. A person may have long-term planning. This includes buying a home, or car, and planning for retirement. The policy buyer may fulfil such plans by buying a life insurance policy.
  4. Tax-Saving Purpose - An individual may save taxes by purchasing a life insurance plan. The premium that he pays is eligible for a tax deduction of a maximum amount of Rs 1.5 lakh under section 80C.

PoSP Insurance Agent - A PoSP insurance agent is an important person when it comes to buying a life insurance policy. The agent is helpful. One may easily contact the agent and buy the life insurance policy. One may find many PoSP agent in their surrounding as it is easy to become a PoSP.

Here are the people who can become a PoSP.

  • A businessmen
  • A homemaker
  • A retired employee
  • A 10th passed person
  • An 18-year-old person

A PoSP also contact the client and sell the insurance policy. He sells different kinds of covers. This includes life cover, health cover, motor cover, etc. He earns a reward on each policy he sells to the consumer.

He earns money by selling the insurance policies. He may earn a reward on each policy he sells. He may also earn a reward in the form of money on the renewal of the insurance policies.

Conclusion

Insurance is a crucial component of financial planning for millennials in India. By choosing the right insurance products, they can protect themselves and their loved ones from financial uncertainties, ensuring a secure and prosperous future. Start early, stay informed, and make wise insurance choices to safeguard your financial well-being.