Life Insurance for Millennials, Why Getting it Earlier is Beneficial?


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Originally published at: https://mawazna.com/blog/life-insurance-for-millennials/

Life Insurance For Millennials In Pakistan

Pakistan’s general and life insurance coverage ratio is still playing catch-up with regional peers such as India and Bangladesh but moving quickly in the right direction. The sector is seeing annual growth of around 30%-35%, a trend expected to continue for the next several years. Education around the benefits of insurance, the positive development of distribution channels and insurance products that are a better fit for local market conditions are the three primary sector growth catalysts.

Despite the impressive sector growth statistics, insurance penetration in Pakistan still sits at less than 1%. That leaves huge scope for further development. Internationally, the demographic where life insurance has the lowest rates of penetration in among millennials. In Pakistan, low life insurance coverage penetration among millennials is thought to be even more pronounced. However, there is a lack of published statistics from Pakistan’s insurance sector covering trends and penetration among the millennials demographic specifically.

Also referred to as ‘Generation Y’, the millennials demographic is roughly (though there is some variance in what different sources define the age group) those born from the early 1980s up until the late 1990s or early 2000s. In other words, those currently (in 2019) aged between their late-30s and late teens.

Across the world, individuals are usually approaching their late 30s before a psychological shift triggers a more tangible comprehension of personal mortality. This is probably influenced by the fact that it is most commonly at this age that we have dependants who rely upon us for their financial security. We no longer only have ourselves to think of but have to consider the financial situation of our dependents should the worst case scenario occur, leaving us either incapable of working or passing away. While that scenario is perhaps statistically unlikely for another few decades, accidents and misfortune do strike.

And while most only begin to consider taking out a life insurance policy late into their thirties or already in their forties, the practicality is that doing so much earlier is actually much more financially beneficial.

Advantages Of Life Insurance as s Millennial. Why Should I Take Out a Life Insurance Policy?

It’s Cheaper and Easier: perhaps the number one argument for why it makes sense to take out a life insurance policy now as a Millennial is that it is probably the easiest and cheapest point of your life to do so. You are young and you are probably healthy. That means you are considered very low risk from the point of view of an insurance company. And for any kind of insurance, the lower the calculated risk of the provider having to pay out, the lower the premiums charged for coverage.

The application and approval process is also a lot easier the younger you are. You might not even be obliged to have a medical check-up if you are younger than your mid-30s and there will generally be a lot less scrutiny and bureaucracy involved.

Your Life Insurance Will Be Worth A Lot More Later in Life: the way life insurance works is that in the worst case scenario your dependants will receive a minimum pay-out on your death. That minimum sum will be paid out regardless of when it is required, as soon as your life insurance policy is activated and presuming you are up-to-date on your premiums. Those are usually due monthly. So even if the worst were to happen a few months after you have taken out the policy, that minimum payment will be made despite you only having paid in a comparatively small amount. That’s the point of insurance and how the business model works.

However, depending upon the kind of policy you opt for, the minimum payable sum will probably increase as the years go by and you have paid more into your policy. So the earlier you start making life insurance premium payments, the more your policy will be worth later in life.

You Have Dependents:  if you already have a family or other dependants that rely on your income for their financial security you should seriously consider taking out a life insurance policy now, regardless of how remote mortality may still seem. The reality is anything can and does happen and you owe it to them to protect them against unforeseen circumstances.

You Have Debts: even if you don’t have financial dependents, and especially if you do, if you have any debts it makes double sense to take out a life insurance policy. If you do not, in the worst case scenario, not only might your family lose the financial support your income provides but they might see any assets jointly owned targeted by your creditors.

You Own a Business: if you are an entrepreneur and have started your own business, a life insurance policy will help protect its survival to the benefit of your family and/or employees in the worst case scenario.

Life Insurance Policies For Millennials: What Should You Look For?

There are two main types of life insurance for any policy holder, whether or not they are a Millennial:

  • Prepaid Life Insurance
  • Term Life Insurance
  • Permanent Life Insurance

Prepaid Life Insurance is a new product that will be launched soon by various Leading life insurers in Pakistan. These are 1 year plans to provide you coverage for accidental death, hospitalization or permanent disability etc and where you can avail benefit of up-to PKR 2 Million as sum covered.

Term life insurance policies tend to be the simpler and cheaper of the two options available to Millennials. These policies are for a pre-defined period of time, which is usually 10, 20 or 30 years. The idea behind opting for a term life insurance policy is to cover a period up until your major life expenses and overheads are no longer an issue. That would typically mean until your mortgage is paid off, kids have been put through education etc. The most suitable period will vary according to your personal circumstances. Term policies will typically offer the most attractive terms to Millennials as their risk of dying before the end of the covered period will be considered relatively low.

Permanent (whole) life insurance policies run indefinitely until you die, at which point a payment is made to your next of kin. As previously mentioned, whole life insurance policies will usually include a minimum payable sum should you pass away. Once you have paid in a certain amount over the years that will gradually increase.

To compare and review the life insurance policies available in Pakistan best suited to Millennial consumers, please refer to Mawazna.com’s dedicated life insurance comparison and review service. Mawanza.com is Pakistan’s premier comparison and review site, championing consumers and Pakistan’s best financial services companies. We offer a transparent and easy to use platform for consumers to compare and receive feedback on financial services products available in Pakistan from insurance to credit cards, consumer loans, mortgages and more.


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