How do growing needs at every life stage change life insurance requirements?
The word life insurance itself creates fear among many individuals as it involves death, accidents, and suffering. But looking at it from a positive side, you need to understand that it is the simplest way of securing the financial commitments of your family members after your absence. Moreover, for an affordable premium, buying a life insurance policy is a long-term investment decision as your family keeps growing to add more responsibilities on your shoulder.
Rakesh Kumar, a 32-year-old management graduate, is working as a senior manager with a top MNC based in Bangalore. Rakesh lives with his parents and younger sister, who is in college. Though not a financial expert, he spends most of his time reading financial planning and investing books. With that knowledge, he decided to make necessary arrangements to create a financial plan for himself since he was planning to get married in the next 3 years and save enough for her younger sister’s education and marriage. He first bought a term insurance plan for a sum assured of Rs 1 crore, so his family doesn’t have to suffer in case anything untoward happens to him in the future. Then, with marriage insight, he chose to increase the sum assured by 5% every year, keeping in mind his spouse and kids. He also selected a policy that allowed adding his spouse to the same policy with 50% coverage. Not only this, he opted for monthly income benefit after his demise instead of lump-sum payout, so his parents and wife will be able to manage the monthly expenses without any trouble. Finally, he added the Accidental Death Benefit Rider and Critical Illness rider for his safety, so he is protected even in case of death due to an accident or managing the expenses in times of any critical illness. In this way, Rakesh was able to address the needs of everyone in the family with just a single-term insurance policy.
As mentioned in the example above, anyone can fulfill the insurance needs at different stages in life with proper planning. However, to accomplish the goals, you first need to answer how much life insurance you need, which will help you clearly understand your requirements and choose the right plan.
Types of Insurance Policies in India
There are 24 life insurance companies in India, each offering a varied set of insurance products suiting the different needs of an individual. You need not get exhausted looking at the number because, with the advent of internet technology, you can search, research, and buy the desired policy at a click of a button. So to find the best life insurance for you, it is essential to possess at least a little bit of knowledge of the types of insurance policies available in the market.
- Term Insurance: The classic form of life insurance guarantees complete financial protection for your family after your demise. The insurer pays a lump sum amount to the nominee if the policyholder encounters death due to untoward incidents, terminal illness, or critical illness. This is a policy that is suited for anyone who is looking for life protection only.
- Money-back policy: Much similar to the term plan, but the premiums paid are returned to the policyholder on surviving the policy term. This is a good choice for those who are confident of outliving the policy term and prefer to receive the premium paid for a modest return, just like savings.
- ULIPs: Unit-linked insurance plans (ULIP) offer the dual benefit of investment and insurance, where a portion of the premium is invested in the market for generating returns. At the same time, the other part is used for providing life cover to the policyholder. In addition, the returns generated can be used to plan for your other goals such as children’s education, international travel trip, starting a business, or any significant event.
- Whole Life Insurance Plan: If you have dependents to support and have to work for an extended period, it is necessary to have an insurance plan that provides coverage for your whole life. While other insurance policies have a limited tenure, whole life plans offer coverage until 99 years of age, enabling you to live a long life without the worry of supporting your family members.
- Retirement/ Pension Plans: These plans are best suited for those who wish to build a retirement fund along with insurance components, so they can avail of guaranteed pension after the age of 60 years while continuing to enjoy the insurance benefits.
At marriage stage: Marriage is a critical life stage in a person’s life, and it introduces you to newer responsibilities along with your spouse. Therefore, your plans could change since you need to take your spouse into account while making decisions. In addition, the coverage of your existing insurance policy may not be sufficient and might require a re-look.
Make use of increasing or decreasing sum assured facilities of your policy to adjust your life insurance needs prevailing at that time.
For kids growth stage: Kids grow very fast, which demands you to have the necessary tools in your arsenal to help them achieve their goals in the future. Investing in ULIP, money-back policies, along other long-term investment options will help you build a corpus for them while still taking care of their financial safety.
There are plans from the best life insurance companies that ensure the child’s monthly education needs are taken care till they attain an age of 21 years, in case of your demise. Similarly, term plans provide you with the flexibility to opt for benefit payout options from -Lump Sum, Lump Sum + Monthly Income, Monthly Income for a fixed term, Monthly income till the end of the policy term, etc.,
At retirement stage: It is the time of life that requires proper health care and peace of mind. With the increasing healthcare costs, it is needed that your insurance policy covers your medical expenses through critical illness cover, mediclaim policy, terminal illness cover, etc., to handle emergencies. Having a retirement corpus with retirement or pension plans also makes a lot of sense as you may want to explore the world, travel to new places, and enjoy your retirement.
Needs are associated with each life stage, and it keeps growing based on your lifestyle and goals. Therefore, to achieve an optimal level of insurance at each life stage, it is essential to start planning from an early age. Moreover, buying life insurance while you are still young helps you lock in at low premiums for a longer tenure.
An adequate life cover ensures the future of loved ones is secured both mentally and financially after your time, in addition to providing peace of mind to yourself.