Millennials working in unorganized sectors should opt for protection plans first and savings plans second.
By Tushar Chatterjee
There are now nearly 426 million millennials in India’s workforce. Add to that the Gen Z population who will also be an integral part of the workforce. How these people manage their current and future financial risks will determine the financial future of our country. Life insurance can help millennials achieve a variety of short- and long-term financial goals.
Millennials working in unorganized sectors should opt for protection plans first and savings plans second. They are people of very modest means but with dependents in the form of wife, children and parents. Most migrant workers fall into this category. Protection plans aren’t too expensive and so even if you lose your job for a few months, they should be able to keep the policies going. Insurers should design products so that even in the event of temporary job loss, there is a car coverage period of, say, two years.
However, as the economy grows further (which it will in the next few years), even migrant workers should be able to cover other financial risks of life. Term plans, after all, only cover the risk of premature death and, as the name suggests, are usually taken out for a limited period. There is also a financial risk in living too long. So, as workers employed in non-union sectors earn better, they should think beyond term plans and start buying insurance plans that support the financial needs that will arise after working life.
For the other two groups of millennials, I don’t think term insurance is of much use. Educated and decently earning millennials are in a much better financial position than their parents at their age. Now, no one is really financially dependent on millennials, neither their parents nor their spouses. Today, most educated millennials have dual incomes in families. If we talk about premature deaths, actuarial tables suggest that out of 100 millennials aged 30, only three could die on average before reaching the age of 60.
Plus, many will enjoy generous group insurance coverage from their company. The thing is, millennials are earning reasonably well these days. But they carry a completely different set of attitudes than previous generations. Today’s millennials are far from loyal to their company, although they are extremely productive while they stay there.
Whole life protection
They don’t hesitate to quit plum jobs and start doing anything of their own choosing. They always have something to fall back on in case of financial difficulties. The result of all of this is that they may not be saving enough for their golden years. Protection plans do not manage the risk of living too long. Even if one takes a whole life protection plan, the money will be of no use to the insured during his lifetime and the premium will be very high.
The solution lies in purchasing annuity plans and whole life plans. While annuity plans allow the insured to earn regular income throughout their life, the whole life insurance plan ensures that cash values are always available for the life insured to meet the various needs of cash.
Additionally, whole life insurance serves as permanent life insurance even when income stops, but some financial protection may still be needed for children who are not yet financially independent or who require higher education that requires heavy investments.
The author is an insurance industry analyst.
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