Life insurance plays an essential role of providing financial assistance to your loved ones in case of emergencies. It is prudent for Gen Zs to start investing in life insurance products as soon as they start earning. Mr Vinit Kapahi, Head of Marketing, Aviva India, lists three things Gen Zs should know about life insurance.
- 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 do not 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 and, at the same time, provide them with insurance cover to deal with the uncertainties of life.
The premium goes towards market-linked funds in equity, debt, or a combination based on one’s risk appetite. And Gen Zs can choose to allocate future premiums among different ULIP funds to spread the risk. ULIPs are considered tax-efficient instruments as they help policyholders reduce taxes while investing in premiums.
- Retirement planning using guaranteed life insurance
A guaranteed plan is a financial product that provides guaranteed payments in a lump sum or as regular payouts over a period.
Gen Zs just need 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. It is advisable for Gen Zs to start when they are young and healthy, as they will be charged lower premiums, further helping them save money and providing a robust retirement plan.
- Tax savings using life insurance
Life insurance can help Gen Zs save money on taxes. For example, in India, policyholders can reduce their taxes under Section 80C of the Indian Income Tax Act. Policyholders can claim a deduction from their taxable income on the premium paid towards life insurance for self, spouse, or children up to Rs150,000 (US$1,904).
Views expressed in this article are the author’s personal opinions.