Over the years, insurance has gained larger prominence in people’s lives, as it provides the requisite protection and aids in building a financial safety net. With India’s working age population set to account for as much as 68.9% of its total population by 2030, the country’s young adults are slated to contribute to increased domestic consumption and power the Indian economy to the 3rd spot in global rankings.
However, with India’s dependency ratio expected to rise gradually thereafter to ~35% by 2050, the importance of securing against future financial risks has become even more important for the country’s young adult population. Against this backdrop, investing in insurance products has become more critical for young Indians, while also offering a host of other benefits when done early on in life.
Ensuring financial security even in the face of adversities
While prima facie life insurance is more associated with providing protection and financial stability in later stages of life, it is imperative to invest in the policy when young, as age is the most critical factor when seen through the lens of life insurance. For young adults entering the formal economy with well-paying jobs and higher discretionary incomes, investing in a life insurance product can often remain an afterthought due to an inherent overestimation about their ability to maintain their standard of living.
In fact, an increasing number of young adults have started suffering from life-threatening ailments at an early age, further underscoring the importance of obtaining financial protection in the form of life insurance in the earlier years of life.
By purchasing a term insurance product with an optional critical illness cover, not only can an individual secure loved ones with a lump sum or staggered payouts in the event of his/her death, but also receive funds to fight against serious illnesses like cancer when necessary.
Moreover, by opting for an accidental death benefit cover, young adults can provide their family with an additional death benefit payout to tide over future financial emergencies. Thus, buying a life insurance product is vital to ensure financial security for the insured and his/her dependents, both during critical illnesses and in the unfortunate scenario of an early demise.
Enjoying lower premiums with added flexibility by purchasing Insurance early
Apart from enjoying complete peace of mind by securing one’s family against future liabilities, purchasing life insurance early on in life has the added advantage of offering higher coverage for lower insurance premiums. Since young individuals have few or no pre-existing diseases or health complications, insurers can provide life insurance coverage at incredibly low premiums due to less underwriting risks.
What’s more, individuals opting for a term insurance early on in life have the added flexibility of increasing their life insurance coverage during personal milestones, all for a nominal increase in the premium expended. These include important events like marriage and the birth of their first and second child, offering them the advantage of increasing both coverage and the number of dependents covered under their term insurance policy. It therefore makes prudent sense to opt for a life insurance product early, making suitable extensions to protect a growing family.
Building a retirement corpus with endowment insurance plans
While term protection insurance products aid in providing protection to young adults during their initial and mid years of life, life Insurance products such as endowment insurance plans render protection in the post-retirement period and help them to save regularly for a stress-free retirement life.
While offering the security of life insurance along with guaranteed returns on policy maturity, endowment insurance plans provide the insured with a lump sum amount that can be used to plan for post-retirement expenses while being tax-free, subject to Section 10(10D) of the Income Tax Act of 1061.
Furthermore, the insured can claim exemption for premiums paid under Section 80C of the above act and can even enjoy additional bonuses that are dispensed by the insurer in case of good performance of their investment activity.
Niraj Kumar, Chief Investment Officer at Future Generali India Life Insurance Company Ltd