Due to the COVID-19 pandemic, a sense of uncertainty has spread over the planet. The pandemic has made us realize the uncertainty that life beholds and the importance of staying prepared for any kind of situation on both personal and financial fronts well in advance.
One of the important steps in staying prepared on the financial front is to take stock of the life and health cover and evaluate if it is adequate to secure the financial future of your loved ones. Given the current state of uncertainty around the world and rising medical costs, it becomes even more critical to choose the right insurance cover.
Today millennials make up 46 percent of India's workforce and contribute 70 percent of the country's household income. To improve their long-term financial health, millennials should rethink how they handle money and explore in the plethora of insurance options accessible.
Nearly half of India's millennial population is economically optimistic and has always wanted to buy insurance policies, especially during this pandemic. But has never done so due to a variety of factors including the initial cost of purchasing them, complicated paperwork, a lack of time, and a different set of lifestyle priorities, among others. Young consumers usually prefer income in hand over long-term financial planning as they have to deal with the cost of house rent, home/car EMI, credit card repayments, etc.
While this generation understands the need for insurance, they also want to be fully sure about the cover and the insurance provider before committing to a long-term product that will protect them and their loved ones from any future uncertainty. The innovative one-year-term plan has become a great solution here. It can be considered a trial for first-time insurance buyers.
One can reap the benefit of a one-year-term plan with a large cover at low premiums and also avail of tax benefits. Once they have witnessed the benefits of a one-year-term plan, they can then purchase long-term insurance or can continue with the one-year plan by opting for an additional year of cover. The one-year-term plan can be considered as the most appropriate product especially during the current times, where the pandemic has made us realize the uncertainty of life.
For someone who is looking for more than life cover, investing in ULIPs can be considered. ULIPs act as entry points into the world of investments. It is a one-of-a-kind insurance policy that offers a policyholder the security of a life cover and the perspective of long-term wealth creation. ULIPs offer an option to invest the premium amount in different asset classes, namely, equity, debt, and balanced funds and include a 5-year lock-in term. This promotes the habit of systematic and disciplined savings while also protecting the dependents in case of an unfortunate event with the policyholder.
The ability to save money on taxes is also an appealing feature of ULIPs. Basis prevailing tax laws, tax benefits can be enjoyed on premiums paid towards the policy and also the maturity amount. ULIPs also give you the flexibility to swap between funds and maximize the value of your returns based on your needs. Basis market conditions you can switch funds and maximize your gains.
There are other options like partial withdrawal, premium redirection, and top-up that provide different choices for the management and investment of your money in the ULIP investment. It can be helpful in saving for long-term goals and for achieving life milestones like a child’s education/marriage, buying a house/car, retirement and more. So, if you're like most millennials and have access to the internet, you can conduct some research on ULIPs offered online by visiting several websites.
Tough times help shape tougher individuals. As a result, careful preparation and judgments will aid policyholders in navigating these difficult times and investing in their families’ future.
The author, Parag Raja, is MD and CEO at Bharti AXA Life Insurance. The views expressed are personal