Insurance Requirements for Different Life Stages – I

Insurance for life stages

Risk and uncertainty are part of everyone’s life and the purpose of insurance is to shift this major financial loss caused due to these uncertainties from individual to insurance companies.

In this article, we are highlighting what types of insurance are most likely appropriate for the different stages of an individual’s life.

Young (Age 22 to 25), Single on your own: At this age you are fresh out of college and just started job. The following insurance coverage you should have.

Life Insurance: One may not require life insurance if no one is dependent on the individual. But at times, the parents (particularly retired parents) are dependent on the children for their support (more so when they require continuous medical support). In such a situation, life insurance is very much important in case of untimely death of the individual. Term plan will be the best form of insurance as at a young age, the premium will be very very low and it will suit the pocket of the earning individual.

However, if the parents are not dependent on him, then he can go for a low cost Unit Linked Insurance Plan or ULIPS as they are popularly known. The idea behind this is to start saving for long term financial goals be it retirement or buying a house. This will ensure that he is financially disciplined and enjoys the benefit of power of compounding by starting early. He can choose Equity funds or balanced funds as an investment strategy while investing in ULIPs.

Health Insurance: Health insurance provides cover to fund medical expenses when an insured is hospitalized for more than 24 hours. The expenses normally covered are cost of operation, nursing and doctors fees, diagnostic tests, room charges as well as pre and post hospitalization expenses.

Many of the companies today provide group health insurance, however if your company do not provide the same, mediclaim / health insurance is must for you.

Personal Accidental/Disability Policies: Accidents are very common now a days and because of this one may be temporary or permanent disable. In that case he/she may lose his job or business permanently or he/she may not be able to work for an year or so. Hence personal accidental/disability policy is a must, which pays lump sum amount in the event of death as well as if the insured is disabled – permanent or temporary.

Vehicle Insurance: If you have a vehicle be it Car/Bike a comprehensive motor insurance is must. In addition to loss to third party comprehensive insurance also covers damage to your vehicle caused by fire, theft, vandalism, accident and falling objects.

Newly Married (Age around 27 to 29): Wedding bells ring in the need to revamp the insurance coverage you were carrying when you were single.

Term Insurance: Now life insurance (term insurance) is most important because someone else is financially tied to you. Term insurance is the purest form of insurance can be taken for the tenure of 30 years or upto age 75. During the time the policy is in force, insured pay every year a fixed amount to insurance company called as premium and if during this time the insured dies, the insurance company pays sum assured to the family of the insured. It is very cheap, for example for a 27 year old guy, for 1 Crore term insurance – the approx. cost is around Rs 9,000. A new variant of term insurance has also been recently introduced in the market which pays the nominee not the lumpsum amount but an annuity over next 15-20 years so that the spouse can receive regular income to meet his/her financial goals.

Term Insurance for spouse: If the spouse is working and the family is dependent on the couple’s income, then Term Insurance is required for both individuals. However if the spouse is not working then you don’t require term insurance for spouse. Also one must remember, if the individual is having a business wherein he may have lot of debtors / creditors, then he must definitely buy the term insurance for spouse as nominee under the Marriage Women’s Property Act, so that she is shielded against any business liabilities arising out of the spouse’s demise.

Medical Insurance: Individual needs to relook at his medical insurance and opt for Family Floater medical insurance, which will cover him/her & his/her spouse. One should also look for medical insurance, which provides benefit of maternity.

Critical Health Insurance:Changing lifestyle, peer pressure etc all lead to higher level of stress in our daily life. Hence, the chances of any critical diseases like heart attacks, cancer, strokes etc is becoming common day by day. Hence a critical insurance policy, which pays the sum assured if individual is diagnosed with any of the critical illnesses irrespective of whether he is hospitalized and the cost incurred is, must for both individual and his spouse.

Unit Linked Insurance Plan: At this age retirement may sound distant dream, but with increased longevity, rising medical expenses and absence of any social security measure in India, retirement planning is most important. One should go for low cost ULIP with the idea of saving money for next 30 years for their retirement. Individual should start with 100% Equity fund and later reduce the same and move towards debt as he approached towards retirement.

In addition, the other insurance covers discussed above should continue. In part 2 of this article, we shall dicuss the types of covers an individual must have for future life stages. Stay tuned for it!

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