About 27% of the Indian population belongs to Generation Z. These latest entrants to the workforce often do not believe in long term planning and like to go with the flow. They tend to plan their finances for their upcoming vacations, education, automobiles, etc. This explains why their financial journey is also equally sporadic! A recent survey by Deloitte reveals that a high percentage of Gen Zs feel stressed, aren’t confident whether they will be able to retire with financial comfort and don’t feel financially secure. Most of them lead a healthy and active life, which puts them off from thinking of insurance as a necessity. However, they haven’t been able to connect wellbeing and life insurance yet. The benefits of a life insurance policy start reflecting only in the long run, and it is easy to assume that it is not paying off- but it is!
Life insurance plays an elementary role by providing financial assistance to your loved ones in case of eventualities. It is prudent to start investing in life insurance products as soon as one starts earning. So, make yourself future ready even as you enjoy your present to the hit! On insurance awareness day, Mr. Vinit Kapahi, Head of Marketing, Aviva India, has penned down 3 things Gen Z should know about life insurance.
1. Wealth Creation through Market Linked Life Insurance
Gen Zs are just beginning their careers, hustling and are busy working hard in this fast-paced world, and often don’t have the time and skills to manage their financial portfolio optimally. For such people, Unit Linked Insurance Plans (ULIP) provide an effective way to participate in the market as well as insurance cover to deal with uncertainties of life. The premium goes towards market-linked funds in equity, debt, or a combination based on one’s risk appetite. A policyholder can choose to allocate future premiums between different ULIP funds basis the prevailing scenario, for example, one can safeguard their savings from equity based funds by moving it into debt-based funds. Also, ULIPs are considered tax-efficient instruments as they help policyholders save taxes while investing in premiums as well as while withdrawing monies.
2. Retirement Planning using Guaranteed Life Insurance
Goal based retirement planning works just like rushed office hours. The earlier one starts, the less time one takes to reach the finish line. With Guaranteed Plans, the earlier one invests, the less they’ll be worried during retirement. A Guaranteed Plan is a financial product that provides guaranteed payments in a lump sum or as regular payouts over a period. One just needs to pay their premiums and choose how they wish to receive their returns – monthly, quarterly, half-yearly, yearly or all at once. Guaranteed Plans are good for retirement for three reasons- long term income, deferred returns and guaranteed rates. Hence, it’s advisable to start when one is young and healthy, warranting them lower insurance costs, further helping in saving money and providing a robust retirement plan.
3. Tax Saving using Life Insurance
Gen Zs have a misconception that insurance is expensive due to limited understanding of the available policies in the market. Life insurance is one of the most affordable methods to financially secure one’s loved ones through an appropriate sum assured and/or accidental insurance. When life insurance is purchased earlier in life, the premium is much lower as the younger one is; the longer is their life expectancy. A life insurance policy can also help purchasers save money on taxes under Section 80C of the Indian Income Tax Act. One can claim a deduction from their taxable income on the premium paid towards life insurance for self, spouse, or children up to Rs 1.5 lakhs. ” Save little but save consistently” The age-old theory worked like magic for generations before us regarding wealth creation and stands to be true for Gen-Z today. You’ll never be younger than you are today, and for most of us, the younger we are, the healthier we are. So don’t delay and tick life insurance off your to-do list.
Views expressed in this article are the personal opinion of Vinit Kapahi, Head of Marketing, Aviva India