As one moves forward in the journey of life, financial needs, requirements, and obligations keep on changing. So, in the case of life insurance planning, one should upgrade, make changes in the life insurance plans as per the requirements and financial obligations. Different stages of life require different insurance.
Young and single: They are financially independent. With many youngsters involved in risky sports like river rafting or paragliding, personal accident and disability insurance is a must.
If one has taken an education loan, then in case of untimely death, it can be a huge burden on the parents. Hence, buying a term insurance plan can be useful here. Many people don’t consider buying a retirement plan at this age, but this should be the priority, as the magic of compound interest with a huge accumulation period can do wonders to the retirement corpus.
Young, married couple with no children: Income is relatively high if both the partners are working. But the need for life insurance rises as financial interdependence is there. Buy life insurance with riders for personal accident, disability, and critical illness. Consider a unit linked insurance plan at this age, as it can be a good option for wealth creation.
Married, with dependent children: Income may reduce as one parent may have to stay at home or leave a job to take care of the child at least for some initial years. Expenses increase, as the requirement of baby care, medical care, and school /college fees is there. One must buy a term insurance plan if not bought yet as the future of the children can be at stake in case of untimely death of an earning parent. But don’t forget to buy a term insurance plan which covers you till 85 years of age. As the average life expectancy has increased to around 70 years in India, covering oneself for only 60 years makes no sense.
Plan for your child’s future and accordingly buy child plans as due to increasing inflation rates, your savings may not be sufficient to sponsor the child’s education and marriage. Retirement planning should on the cards as that is one of the final financial goals of life, the earlier you start, the bigger the corpus.
Pre-retirement stage or an empty nest: At this stage, many people have already cleared their loans and other financial obligations. Assess your post-retirement needs and buy an immediate annuity or deferred pension plan with the help of a provident fund or gratuity amount paid by the employer.
While transitioning from one stage to another, don’t forget to upgrade the life insurance plan. Life insurance amount should be 20-25 times of the annual income. Also, don’t forget to add or change the nominee as per the changing needs of life. This will ensure that the policy benefits reach the right person.
(A P Singh, head of Institute, Amity School of Insurance, Banking and Actuarial Science (ASIBAS) and Pallavi Seth, faculty, ASIBAS)
