Term Insurance for Gen Z

Table of Content

1. Why Gen Z Should Consider Buying Term Insurance

2. Common Misconceptions Gen Z Has About Term Insurance

3. Types of Term Insurance for Gen Z

4. Features to Look for in a Term Insurance Plan for Gen Z

5. How to Choose the Right Term Insurance Plan?

6. Benefits of Buying Term Insurance Online for Gen Z

7. Summary

8. FAQs on Term Insurance for Gen z

In today’s world, Gen Z is juggling early career options, student loans, responsibilities, freelance jobs, etc. Amidst these uncertainties, term insurance offers a powerful solution with higher coverage at an affordable price for a fixed period. Stepping into the insurance journey early in life enables them to lock in higher coverage at a nominal premium for long-term protection. It also instills financial discipline and secures their family’s financial future without straining their budget. In all, it serves as an income protection for Gen Z who has just started their career. 

Here are other reasons why term insurance matters for Gen Z: 

• Financial Protection for Families

With health issues on the rise among Gen Z, term insurance for Gen Z creates a safety net for their loved ones. To quote an example, studies have shown that 55% of youngsters aged 20 to 44 years had high blood pressure, one of the main causes for stroke and cardiac issues².

In the event of an unfortunate occurrence, the loss of income, especially if the insured is the only breadwinner, can create a huge financial gap. Their family will face financial constraints with no backup funds. With a term insurance in place, the death benefit received will help them to manage existing as well as forthcoming expenses. 

• Affordable Premium Rates

If started early, the term insurance premiums are much lower when compared to other expenses of Gen Z. For instance, a one-time meal order may cost a minimum of ₹ 225, a monthly gym membership would be between ₹ 1000 to ₹ 1500, an OTT subscription of ₹ 500³, etc. Compared to these, they can get a ₹ 1 crore life cover at ₹ 500 to ₹ 900, which would cost less than ₹ 16 to ₹ 30 per day.  Buying a term insurance during their early career days is a smart decision, for higher coverage at affordable premium rates for a longer term. 

• Tax Benefits

Apart from the benefit of lower premium rates, term insurance offers tax benefits, which is a smart way of reducing the tax burden while staying protected. They can claim a deduction of up to ₹ 1.50 lakhs under Section 80C of the Income Tax Act, 1961⁸. Also, the death benefit is tax-exempt under Section 10(10D) of the Income Tax Act, 1961⁸. 

• Debt Payoff

Gen Z belongs to the new-to-credit segmsent. The overall loan recorded to this segment by December 2024 is 41%, which includes credit cards, home loans, and personal loans⁴ & ⁵ With Gen Z resorting to credit cards to pay for products and services, availing of home loans and personal loans to achieve their goals, the debt burden falls on their families in their absence. The death benefit will cover the debt payoffs and will help them manage other recurring expenses as well. 

Why Gen Z Should Consider Buying Term Insurance

Gen Z focuses on financial independence and plans finances more prudently. Investing in a term insurance early means higher life coverage, lower premium rates, and longer protection for a fixed period.

With rising job uncertainties, health issues, and inflation, it is more practical to buy term insurance when young and at the beginning of a career. Moreover, with dependent parents, student loans, an unpredictable job, etc. The other reasons for Gen Z to consider buying term insurance are⁶:

• Affordable Premium Rates

By investing in term insurance early, Gen Z can harness the early age insurance benefits, i.e., higher coverage at a lower premium. The monthly premium will be lower at ₹ Rs.21/day^*** compared to their daily meals orders, OTT subscriptions, gym memberships, etc., which would sum up to around ₹ 2500 p.m. 

• Tax Benefits

Term insurance for Gen Z is not only cost-effective but also tax-efficient. They can claim a deduction of up to ₹ 1.50 lakhs for the premiums paid towards the plan. This helps them reduce their tax burden while being protected financially. The beneficiaries receive the payout in full as the death benefit is tax-free under Section 10(10D) of the Income Tax Act, 1961¹. 

• Debt Pay Off

Along with the student loans availed for their education, Gen Zs with dependence on credit cards for all payments tend to have credit card outstandings. If anything, untoward happens, their family will be burdened with these loans. The payout from a term insurance will help them pay off the debts without any financial stress. 

Common Misconceptions Gen Z Has About Term Insurance

Several misconceptions hold back Gen Z from investing in term insurance. Debunking the insurance myths among Gen Z is essential to build clarity and trust, and encourage them to shift their mindset from investing in traditional investment methods to term insurance⁷.

• I Don’t Need Insurance at This Age

Life is unpredictable, and mishaps like accidents, health issues, or loss of income can strike at any age. It is never too early to buy HDFC term life insurance for youth considering the financial security it provides for your family.

• Term Plans Are Too Expensive

Term plans are more affordable compared to other life insurance plans. If purchased at a young age when you are healthy, you get a higher cover for less than ₹ Rs.21/day^***, which is much more economical when compared to your OTT or gym subscriptions. 

• My Employer Insurance Is Enough

Insurance provided by an employer is generally limited and may not be adequate to cover your family’s future requirements. A personal term plan is recommended for continued protection. 

• I Can Buy It Later When I Settle Down

When it comes to term insurance, earlier is better. The more you delay the costlier the premiums will be. Moreover, you may develop health issues as you age, and it may lead to policy rejection or higher premium rates. 

• It Has No Returns, So It’s a Waste

A term insurance is a pure protection plan and offers financial security to your family in your absence. Life insurance for young adults may not yield returns, but it gives peace of mind that your family is financially secure even in your absence. 

• Claim Settlement Is Complicated

Claim settlements are faster now with the entire process made online. The claim settlement is seamless, provided you submit all the required documents and provide accurate information. 

• I’m Too Healthy to Worry About It Now

The premium allocation for term insurance for Gen Z depends on age and health condition. Availability of life coverage when young and healthy is a smart move as it results in higher coverage at lower premium with longer protection. 

Types of Term Insurance for Gen Z

Different types of term insurance for Gen Z are available for them to choose the right plan that syncs with their needs. 

• Regular Term Insurance Plan

Understanding the importance of insurance at 20s will encourage Gen Z to invest in regular term insurance plans. This is the most basic and affordable type of term plan. This suits the Gen Zs who want maximum protection without hurting their budget. The plan offers financial protection to the insured’s family but provides no returns. However, the importance of the plan lies in giving peace of mind that the family will lead a financially hassle-free life even in their absence. 

• TROP Plan

The Term Return of Premium plan combines protection with savings to gain the trust of Gen Z. The plan offers death benefits to the nominee if the insured expires during the policy term. If the policyholder outlives the policy term, the entire premium paid is returned as a maturity benefit. Gen Z, who do not want to invest in insurance for pure protection, will appreciate this plan. 

• 100% Refund of Premium at No Cost Term Plan

This is a new term insurance variant where the entire premium paid is returned if the policyholder exits the plan before the term. This is an ideal insurance for freelancers and those with irregular income patterns. Their families get protection, and the money does not go wasted. The premiums paid until the exit date are refunded if they close the plan when they no longer need it. This plan is ideal for Gen Z as they appreciate commitment-free options. 

Features to Look for in a Term Insurance Plan for Gen Z

Young adults should not overlook the features of the term insurance plan for Gen Z when choosing the right plan that aligns with their needs. It helps them to make a benefit-driven, informed decision. 

• Flexible Premium Payment Options

With several premium payment options available, such as monthly, quarterly, or yearly premium payment options, Gen Z can choose the frequency that suits their cash flow. This flexibility supports financial planning for Gen Z and makes budgeting easier. It ensures that protection is available at a price that syncs with their lifestyle and income cycle.

• Easy Online Application and Quick Policy Issuance

This feature appeals to most Gen Z, who prefer speed and convenience. The digital-first solutions that enable online term insurance applications fit their mindset. Buying insurance is now faster with facilities such as e-KYC, online verification, and paperless documentation. The quick policy issuance feature makes the purchase process seamless and provides immediate protection with a tech-enabled experience.

• Customizable Coverage with Rider

This feature of customising the plan to their specific needs makes the term insurance plan comprehensive for Gen Z, who have begun their financial journey. Riders ^** such as critical illness riders, accidental death riders, waiver of premium riders, etc., enhance the overall coverage of the basic plan. The add-ons allow young adults to personalise the plan based on specific risks and their lifestyles. 

The critical illness rider for young adults provides for treatment and other costs when there is a major financial setback due to the illness. A waiver of premium rider ensures the life cover continues when the policy is unable to pay the premium due to loss of income on account of disability. 

• Affordable Premiums with Long-Term Benefits

Buying a term insurance at an early age enables long-term protection at a nominal cost. Since the premium is fixed for the entire policy term, investing early results in long-term savings. It is a wise move for young adults planning for the future, for long-term protection at an affordable price. 

• Return of Premium Option

Gen Zs do not prefer losing money in an insurance plan. They appreciate the return of premium option as it gives peace of mind that the plan offers a maturity benefit and refunds the premiums paid if the insured survives the policy term. 

• Trusted Brand and Claim Settlement Ratio

Gen Z essentially chose a term insurance provider with a high claim settlement ratio as they value trust and transparency. A brand with positive customer reviews, strong after-sales support ensures reliability and gives peace of mind to young adults that their family will get the deserved financial support when it matters most. 

• Add-on Benefits and Wellness Perks

Some brands provide additional services such as wellness rewards, annual health check-ups, fitness tracking, or teleconsultations. This is beyond the basic coverage. It encourages a healthy lifestyle and preventive healthcare. These benefits add value to the plan and enhance the general appeal of term insurance as a holistic financial product.

How to Choose the Right Term Insurance Plan?

Gen Z have to consider the following points to choose the right insurance plan:

• Understand Your Life Stage and Financial Goals

The insurance needs keep changing at every life stage. Low premiums build a financial base for Gen Z in the early years. Marriage enhances responsibility and requires higher coverage. Starting a family will require more coverage to secure children’s future. Keeping the insurance coverage in sync with changing needs ascertains financial security at every life stage.

• Estimate the Right Sum Assured

Gen Z should factor in their income, financial commitments, dependents, future goals, and inflation to estimate the right sum assured. Ideally, the coverage of 10 to 15 times the annual income should be adequate.

• Select the Right Policy Term

Gen Zs should consider their retirement plans, future financial goals, etc., before selecting the right policy term. Coverage of up to 60 to 65 years of age or until all major financial objectives are met is suggested for peace of mind that their families are financially secure, even in their absence.

• Compare Plans Based on Benefits, Not Just Premiums

Premiums should not be the sole criterion for plan comparison. You should compare plans based on coverage, riders, flexibility, and reliability of the insurance company. A slightly higher premium brings in strong protection, reliability, and peace of mind in the long run. 

• Check Claim Settlement Ratio and Brand Credibility

Checking the claim settlement ratio and brand credibility is crucial to ensure your family does not face trouble during claim settlement when they are dealing with an emotional crisis.

• Look for Digital Services and Flexibility

As a Gen Z, you value convenience. So, look for insurers offering digital services such as online policy purchase and renewal, app-based policy tracking, and chatbot support. Look for premium payment options and add-ons that align with your lifestyle and changing financial goals.

Benefits of Buying Term Insurance Online for Gen Z

The benefits of an online term plan for youth are:

• Quick and Hassle-Free Purchase

Online term insurance purchase eliminates time-consuming paperwork. With easy access to apps and websites with upload options, they can complete the purchase process without having to visit a branch or attend agent meetings. 

• Transparent Comparison of Plans and Features

With all the details regarding premiums, benefits, and riders of plans from different insurance providers available on online platforms, they can easily compare plans and make informed decisions without relying on agent input.

• Lower Premiums Due to Reduced Operational Costs

Without the intervention of agents or middlemen, insurance companies save on operational costs such as agent commissions. Therefore, online term plans are offered at lower premiums, making it a cost-effective option for tech-savvy young buyers. 

• Easy Access to Customer Reviews and Ratings

With easy access to customer reviews, claim experiences, and star ratings online, Gen Z can make informed decisions based on brand credibility and transparency. 

• Instant Policy Issuance and Digital Documentation

Online policy purchase enables digital documentation and instant policy issuance. The policy documents are sent through email or the app. The policy document can be downloaded immediately without waiting for physical copies. 

• 24x7 Availability and Self-Service Tools

Mobile access, chatbots, and online calculators are all preferences of Gen Z for convenient policy purchase. With all these services available round-the-clock, Gen Z can buy and purchase the policy from anywhere and at any time. 

Summary

Term insurance for Gen Z is not a backup but a wise lifestyle choice. With affordable premiums, flexible premium payment options, add-ons, and digital convenience, the term plan offers protection and peace of mind. Buying a term plan early in life provides long-term security for the financial future of loved ones at a nominal price, allowing resources for Gen Z to secure their future. 

FAQs on Term Insurance for Gen z

Q. What does Gen Z think about insurance?

Gen Z views insurance as a smart financial decision, and not just as a safety net. They feel it is a prudent solution for income protection and economic independence. Affordable premiums, digital convenience, transparency, and trust affirm their view about term insurance.

Q. How quickly can I get term insurance approval as a Gen Z buyer?

If all the required details and documents are provided, the insurance companies generally give their approval within 15 days.. 

Q. Can I convert my term insurance to a different type of policy later?

If you have a convertible term insurance, you can convert it into a whole life insurance. 

Q. Can students or freelancers buy term insurance?

Yes. Students or freelancers can purchase term insurance, provided they are 18 years old.