Millennials should opt for term insurance plansâ€”the cheapest life insurance product with a higher sum assured. Photo: iStockphoto
Mumbai: Smruti Valegaonkar, 25, Mumbai-based senior architect and product designer at MuseLab Design Engine, has a life insurance cover. â€śMy parents bought it when I was a child,â€ť said Valegaonkar, who has an endowment life insurance plan. The nominee of her insurance plan is her younger brother. â€śIf she does not have dependence requirement, Valegaonkar can continue with the same plan,â€ť said Suresh Sadagopan, founder of Ladder7 Financial Advisories. However, Valegaonkar wants to buy a separate life cover next year.
Unlike Valegaonkar, Bhavika Maniar, 30, operations manager at Indiabulls Asset Management Co. Pvt. Ltd, does not have a life insurance cover. â€śThis is the right time to buy because I have a stable monthly income now,â€ť said Maniar.
If you are in your 20s and 30s and, like Valegaonkar and Maniar, are considering buying a life insurance policy, here is what you should know:
Do you need a life insurance policy?
Life insurance is an instrument that gives protection to your dependants. In case you die, the sum assured goes to your dependant. â€śThe right age to get an insurance plan is when you have some financial dependence on your income,â€ť said Sadagopan. If your parents, siblings, spouse or children are dependent on your income, you need a life insurance policy. If you are single and your parents or siblings are not dependent on your income, you donâ€™t need it. Every individual has different types of support and financial dependence on them. As a first time insurance buyer, you need to assess all parameters and could take help from a financial adviser.
How to pick the right one
Once you know you need a life insurance cover, the next step should be to buy it immediately. â€śIt is essential to revisit your life insurance requirements today. You need to assess new risks and buy a new cover when the need arises,â€ť said Vignesh Shahane, chief executive officer of IDBI Federal Life Insurance Co. Ltd.
The earlier you buy a life insurance cover, the cheaper it will be. For instance, a â‚ą 1-crore term cover will cost a 35-year old around â‚ą 9,500 an annum in premium. A 30-year old will get it for a premium of about â‚ą 7,500 an annum. How do you decide on the cover? â€śIf you are in your mid-twenties, your ideal life insurance cover should be around 17-20 times your annual salary,â€ť said Sadagopan. Lastly, time to take a call on the type of insurance cover. There are broadly four types of insurance coversâ€”endowment, money back, unit-linked and term plans. Opt for term plansâ€”the cheapest life insurance product with a higher sum assured.
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â€śInsurance plans are for the security of your family members and dependents. Term plan provides protection, as there is no payout, except on death, and the premium is also very low,â€ť he said. Remember to go through all parameters before buying and ensure you donâ€™t get trapped in a life insurance policy you donâ€™t need.