Term Plans Not On Young Millennials’ Radar

For the younger group of millennials, term plans don’t feature on top of their investment pyramid, says Manish Sangal, Chief Distribution Officer-Retail, Bajaj Allianz life in a conversation with Himali Patel

1. Do you think term plans are popular with millennials?

Most of the older group of the millennial generation are within the working group, and have income dependents or may have a loan of some kind. Therefore, their need of a term plan is very high, and data shows that they purchase term plans to provide cover for their family, to ensure there isn’t an additional financial burden on the family to pay off the loan, or to simply enjoy the tax benefit.

On the other hand, the younger group of millennials, say who have just started to work or have a couple of years of work experience, term plans don’t feature on top of their investment pyramid. They are keen towards investing for themselves and their own life goals. Their awareness of the holistic benefits of term plans is low, not beyond tax benefit, and perhaps this is what keeps them away from buying a term plan. 

2. What according to you could make millennials buy life insurance at a younger age?

As mentioned, increased awareness on the holistic benefits of a term plan is required. Something beyond the tax benefits per se. For instance, not many know that term plans when bought at a younger age are cheaper (premiums are lower), and it is this amount that an individual pay throughout the policy term. It’s ideal to buy a term plan early on with maximum policy term and purchase it during the working years.

3. Is a medical check-up compulsory for purchasing a term plan?

 Some insurance policies do not require medicals and it depends on insurers whether to call for medicals or not. However proper disclosure including medical examinations if called for, are an important part of issuing a policy and is the basis on which the insurer grants the cover.

4. Do you think millennials should consider buying a cover beyond the earning years?

Today, some companies offer term plans that cover an individual till the age of 75-80 years. Such plans are suitable for those individuals whose family is financially dependent on them even at a later age, or if they have any outstanding loans that needs to be paid off. In such a case buying a term plan ensures that your loved ones continue to have the same lifestyle and go on to achieve their life goals even in your absence, without any financial burden 

5. Usually, the thumb rule for buying insurance cover is to buy a sum assured equivalent to 10 times the annual salary. What is your advice to millennials on this?

This is a very simplistic approach to arrive at a minimum insurance cover. One should follow a more scientific approach to assess their insurance needs and then decide on the amount of insurance cover required. To understand the right amount of insurance cover needed, one should start by evaluating their family’s life goals, its estimated cost and the expected time-frame to achieve that goal, then factor in the lifestyle expenses, existing liabilities and the expected rate of inflation. This figure will help one decide on the amount of life cover required to protect their family’s life goals.