Why the Youth Must Understand the Importance of Insurance
The 20’s are a time of incredible changes and growing up a.k.a adulting. You land a job, start a business, move out, get into a stable long-term relationship, do some of these things, or maybe none of them. In all of this hullaballoo, though, one thing is forgotten- managing your finances like a pro. Sure, you would be stocking up on your monthly savings. But, is it enough? Are insurance plans really crucial?
In lieu of the International Youth Day celebrated in August, here’s the answer revealed- for the youth, the millennials, the ones in their 20’s, and the future of this country.
The Game of Losses
As per a global survey by Standard & Poor’s Financial Services LLC (S&P), less than 25% of adults are financially literate in South Asian countries. When the focus was directed at India, it was found that even though 17.5% of the world’s population lives in India, for an average Indian, financial literacy is yet to become a priority. Nearly 76% of the adult population has no understanding of basic financial concepts. Compared to the rest of the world, these results are bleak.
This lack of proper awareness and guidance by financial institutions leads people to buy insurance policies without proper planning. Then they give up midway because they don’t have money to pay the premium. The agents, on their part, are so busy aggressively selling that they are unable to porperly assess the consistency in income streams of the buyers.
This giving up midway results in harsh penalties which further turns people off from buying insurance plans. According to the Insurance Regulatory and Development Authority of India, on an average, only 61 out of every 100 life insurance plans purchased are renewed after one year.
16 out of 24 life insurance companies couldn’t retain a third of the sold policies after the 5th year of policy sale. 2/3rd of the life insurance plans are no more. This doesn’t only translate to the loss of business for insurance companies but a large hole in the financial situation of many Indian families.
Money that would’ve been used for long-term investments and to meet important life milestones is invested in physical assets and short-term plans. This is the same mindset and poor financial planning that is modeled to children and youth which leads them to make the same mistakes that their parents did. That is unless they make the active choice to step up their game and become financially literate.
Why you, as the youth, need to be financially literate
In your 20s, you are young, wild, and free. Your entire life stretches out in front of you as an unforgettable, adventurous ride. But like you would on any adventurous undertaking, you need to be prepared for possible bumps on the roads, delays, and misfortunes.
First of all, the sedentary flavor of people’s lifestyle these days means they are more susceptible than ever to illnesses. Heart diseases, neck problems, and diabetes strike millennials in their late 20s only because of sitting hunched over laptops and not paying attention to their fitness.
You’ve barely begun with life and the first tragedy is already here. Do you dip into your savings then and spend it all on recovery? Is that the only way? No. You can get a health care plan that includes critical illness coverage. And some of these come with coverage for both you and your partner.
After taking care of security on the healthcare front, you can start branching out and imagine your life with the family you hope to have one day. You’ll want your kids to have a bright future and study at the top institution in the country or world. That’s going to cost some big bucks.
Again, are you going to fund it paycheck to paycheck? Primary and senior secondary education can work that way. But higher education for a professional degree? You’ll need to start building a corpus early on. Education insurance plans will be your friends here.
Finally, what if some unfortunate incident were to befall and you would no longer be there to look after your family? How do you plan to keep them secure beyond your own existence and make up for the lost income? Term insurance and life insurance plans can help you here. Your family will have a source of money as they adjust to your passing and build a life anew. This same amount can be used to pay off EMIs, debts, and other financial danglers.
The icing on the cake for all these plans? The earlier you start, the better. For young people, the premium amounts are lower than those who are outside this bracket. And if the premium amount doesn’t change in the policy, you can reap guaranteed returns for a modest monthly/ annual investment. Doesn’t your life and that of your loves ones deserve this thought and care?
Which insurance plans to buy?
The biggie. Starting small is key. You need to mindful of your income, your expenses, and how much premium you can afford to pay.
To begin with, you can get a health insurance plan. Aviva’s Heart Care plan allows you to protect yourself and your partner for life against any of the fatal 19 heart conditions. With the risks of sedentary lifestyle looming darkly over all of us, you can look to invest in it.
Next, you can go for a life insurance plan. There are two types you can choose between- term insurance and permanent life insurance. The first one is for a particular term only and often, doesn’t provide maturity benefits either. The amount of premium paid is lower, though. The permanent life insurance plan offers security indefinitely until you die and might also come with maturity benefits- at a higher premium, though. A possible modus operandi is to choose a term insurance plan that can be converted into a permanent life insurance one.
And finally, you can begin building the education corpus for your kids. If you start doing this even when the child is 3 years old, you can save up a considerable amount. Paired up with a life insurance plan, your child’s future will be secure.
Financial literacy and financial planning is not rocket science. You don’t need to know and do it all in one day. So, what are you waiting for now? It’s time to own your financial destiny and to spearhead the movement of financial literacy in India. As the future of our nation, we need you- the youth of today and tomorrow.