You should consider your age and life stage when investing in a policy of life insurance. Life insurance is essential, but your strategy should be adapted to your situation in order to maximize the benefits. Let’s first look at some of the different types of life insurance policies available.
Life Insurance Guide: A Guide to the Different Types
It is important to understand the different types of life insurance available in India in order to determine their suitability for your portfolio based on your age and life stage. There are three main types of insurance policies:
- Term insurance –This provides life coverage for the policyholder during a specified period. If the insured dies within the period of the policy, the assured sum is paid to the nominees.
- ULIPs They combine insurance and investment. You can get the same life insurance coverage, but also invest in market-linked financial instruments to accumulate future wealth.
- Traditional endowment policies – These plans offer life insurance and the opportunity to save.
- Whole Life Traditional Endowment Insurance Plans – This plan offers life insurance for as long as the policyholder lives, which can be up to 99 years or 100.
- Child insurance policies – This is a plan to help you build a future corpus that will meet your child’s education and/or other requirements. The death benefit is paid to the beneficiaries in the event of the parent (policyholder’s) death.
- Pension Plan –These pension plans provide life insurance and help build retirement wealth. You can either take the lump sum payment upon maturity, or use it to provide a regular income after retirement.
After we have discussed the different types of insurance, let’s understand how to plan your insurance portfolio according to your life stage.
Age-appropriate strategies for life insurance
You should use an online calculator to determine the cost of a certain amount of coverage for a policy. You can use these age/life-stage-based strategies.
- Young, Unmarried As a young, single professional, between the ages of 20 and 28, you will have few responsibilities. You can get term insurance at reasonable rates because you are young and your insurer has lower risks. It is not necessary to have a large sum assured, but the amount should be enough to cover your family’s future needs. Alternatively, you could choose to invest into a suitable ULIP to enjoy the benefits of both building a corpus and life insurance. Compounding will maximize your returns if you invest early.
- Newly Wed –If your age is between 25 and 35 and you’re newly married, with increased responsibilities you may need to adjust and revise your term insurance policy to increase the amount assured. You can purchase a new insurance policy for your spouse. Select a sum that will cover the future financial needs of the whole family. You can sometimes boost your existing policy by adding suitable riders and top-ups. You can add your spouse if you already have a ULIP policy. If you have only a term insurance plan, you should start investing in a ULIP in order to build a corpus. After marriage, many life goals are achieved, such as buying a house or a car.
- Parenthood Those aged 30-40 may find themselves facing increasing financial obligations to their families. The plan must cover the new family members and the current needs of the family. Start investing early in Child or Endowment Plans to help save for your child’s future. You should also start planning your retirement at this time. Retirement planning is essential. Your investments may have been used to achieve other goals in life, but they are still important. Consider the different pension plans available and make the best use of your time.
- In your mid-forties – You should consider investing in child plans to cover the education costs of your children. Also, you can opt for ULIPs for your future goals such as retirement, home ownership, or repaying your home loan. You can choose a term policy to cover various liabilities, such as home loans and personal loans. You must also have a retirement plan in place.
- The mid-fifties –This period is when most people are earning the highest income, and their children have either reached independence or gone to college. Pension plans allow you to go all-out for retirement.
The conclusion of the article is:
Life insurance is designed to provide financial security for your loved ones and to ensure that you can achieve your goals at different life stages despite the challenges of life. You can upgrade your life insurance policy for a small fee to include popular riders such as critical illness, accidental death benefits, premium waivers, etc.
