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Life Insurance as a Young Adult – Do I really need it?

Life Insurance

LNo young adult, when he/she hears the words ‘Life Insurance’, thinks to themselves “I really need life insurance”. It is perhaps the most skipped topic, if not ever brought up, in their conversations. They might have discussions on sports, politics, even philosophy but the though of insuring their life never dawns upon them till the time they get married and are responsible for more than just themselves.

And why should they? They are at the peak of their lives, living to the fullest, enjoying their unmarried life without a care in the world. All kinds of them – working professionals, entrepreneurs, business owners have no reason to do it.

Why do they not want to think about it?

One of the major reasons why they tend to move away from the topic is because they don’t want to think about death. Not even others, let alone their own. When the thought of death comes in your mind, you take a deep breath and just thank god for that beautiful life granted to you. At that point of time, every problem in your life seems like something you’d laugh off. And hey, let’s be honest – who would want to think of death like that? Who would want to think of anything after their death? Is the new generation scared of the thought? Perhaps, yes.

Life isn’t a movie where you’d still be looking at the person holding a gun to your head in the eye. You’ll be crying and begging for mercy. You can never know what’s going to happen. You cannot presume you are going to live a long life and see your grandchildren. Life Insurance is a very necessary cover to have. Yes, it is not for you. It is for your loved ones. Be selfish when it comes to your happiness, but be selfless when it comes to people who mean everything to you.

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Different Types of Life Insurance Policies in India

Here are the some different types of Life Insurance Policies in India

1. Term Life Insurance

Term insurance is the simplest form of life insurance plan. Easy to understand and affordable to buy.

A term plan provides death risk cover for a specified period. In case the life assured passes away during the policy period, the life insurance company pays the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums.

There’s an option to add riders to widen up the coverage.

The death benefit is payable as lump sum, monthly payouts, or a combination of both.

There’s no payout if the life assured outlives the policy term. However, these days there are companies offering Term Plans with Return of Premiums (TROPS), where insurance companies payback all the paid premium amount in case the life assured outlives the term period. But, such plans are costlier than the vanilla term insurance plan.

2. Unit Linked Plans (ULS)

A unit linked plan is a comprehensive combination of insurance and investment. The premium paid towards ULIP is partly used as a risk cover (insurance) and partly is invested in funds. One can invest in different funds offered by the insurance company depending on his risk appetite. The insurance company then invests the accumulated amount in the capital market i.e. in bonds, equities, debts, market funds, or a hybrid funds…

3. Endowment Plans

Endowment plan is another type of life insurance plan, which is a combination of insurance and saving.

A certain amount is kept for life cover – insurance, while the rest is invested by the life insurance company. In an endowment plan, if the life assured outlives the policy term, the insurance company offers him the maturity benefit. Moreover, Endowment Plans may offer bonuses periodically, which are paid either on maturity or to the nominee under death claim. On death, the death benefit is payable to the nominee.

Endowment plans are also commonly known as traditional life insurance, although, there is an investment component but the risk is lower than the other investment products and so are the returns.

4. Money Back Life Insurance

This is a unique type of life insurance policy, wherein a percentage of the sum assured is paid back to the insured on periodic intervals as survival benefit.

These plans are also eligible to receive bonuses declared by the company from time to time. This way, policyholder can meet short-term financial goals.

5. Whole Life Insurance

A whole life insurance policy covers the life assured for whole life, or in some cases, up to the age of 100 years. Unlike, term plans, which are for a specified term.

The sum assured or the coverage is decided at the time of policy purchase and is paid to the nominee at the time of death claim of the life assured along with bonuses if any.

However, if the life assured outlives the age of 100 years, the insurance company pays the matured endowment coverage to the life insured.

The premiums are higher as compared to term plans. Whole life insurance plans also offer partial withdrawals after completion of premium payment term

6. Child Plan

Child plan helps to build corpus for child’s future growth. They help to build funds for child’s education and marriage. Most of Child Plans provides annual installments or one time payout after the age of 18 years.

In case of an unfortunate event, the insured parent passes away during the policy term – immediate payment is payable by the insurance company. Some child plans waive off the future premiums on death of the life insured and the policy continues till maturity.

7. Retirement Plan

Retirement plan helps to build corpus for your retirement. Helping you to live independently financially and without worries. Most of the child plans provide annual installments or one time payout after the age of 60 years.

In case of an unfortunate event, life assured passes away during the policy term – immediate payment is payable to the nominee by the insurance company. Death benefit will be higher of coverage or fund value or 105% of premiums paid. Vesting Benefit will be payable if the life assured survives the maturity age. In which case, payout will be fund value which has to be utilized for buying an annuity.

Requirements of a Life Insurance policy vary from person-to-person. What is suitable for you might not be suitable for your friend. So, think wisely and discuss with you friends and family before choosing.

To add something, or let us know how you feel about this blog, let us know in the comments. All feedbac, critical or appreciative, is appreciated!


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