Life insurance is one of the most commonly available mechanisms to hedge the risk of a premature loss of an earning member of a family. However, over the years, the sector has evolved and now, life insurance is counted among the preferred saving options for individuals.
With more number of companies entering the life insurance market,the type and number of policies available for an individual have grown multi-fold. What adds to the confusion for the common man is that there are very little differentiating factors among the products offered by these companies within a particular segment.
YOUNG EARNERS who have just joined the workforce or have around one to two years of experience and have no dependents and/ or liabilities technically do not require any life insurance policy. Consequently, if they have any liabailiteis or dependents, the insurance cover should be computed based on these needs only, and the best way to provide for this coverage would be a pure risk plan or term plan.
For individuals below 30 years of age, term plans have become really affordable and economical. On the other hand, even if these young individuals have no liabilities or dependents but are looking to add on both/ either of these within the next one year, they should opt for a term plan today before their next birthday to maximise the 'early movers' advantage on premium costs.
Special care should be taken to add the 'permanent disability' and 'critical illness' riders to the term plans at this stage as the premiums for these riders would also be available at very economical rates.
YOUNG FAMILIES without kids should look to adjust/ enhance the life insurance coverage under their respective term plans based on their needs and goals over the next 5-10 years. Adequate health insurance coverage should be added to one's insurance portfolio.
It would not be a bad idea to add standalone health policies in addition to any employer-provided health programmes. If the critical illness riders have been missed in the earlier stage, then they should be added here. Standalone permanent disability covers to enhance the disability coverage should be considered during this stage too.
FAMILIES WITH KIDS, a decent monthly savings pattern and not averse to using life insurance for their savings should look to investing in money-back policies and unit-linked products at this stage. A combination of both these plans helps in averaging the yield on policies.
Children plans are an excellent choice among the unitlinked plans at this stage as they provide various benefits like providing the sum assured to children in case of the parent(s) death providing lump-sum money at major milestones of their child's life and also providing double to triple life cover, if needed.
Medical covers should be enhanced to the maximum permissible limits and any top-up plans, if available, should be considered.
Unit-linked pension plans can also be considered to supplement savings through other modes for retirement.
MATURE FAMILIES can look to adding whole-life policies to their portfolio in order to make provision towards any terminal medical expenses, funeral costs or for some compulsory dues to be paid on death.
Allocation for such expenses is not specifically made by individuals thus adding to the financial strain associated with death. Since whole-life policies eliminate the uncertainty factor with death, the policy proceeds can be utilised to meet these expenses.
PRE-RETIREES AND RETIREES should take great care to retain only whole-life policies and medical policies in their insurance portfolio. Situations where the individual would be required to pay insurance premiums, other than the ones mentioned, even beyond his retirement should be avoided. Immediate annuity policies may be considered by retired individuals to be included as a part of their retirement portfolio.
It is very important for individuals to review their insurance needs at different life stages with the help of their financial planner and carry out the necessary changes.
Weeding out outdated insurance policies can certainly bring a lot of cost-saving for individuals.
No comments:
Post a Comment