Stage-Wise Life Insurance Plans – How To Plan Your Strategy
If you want to invest in a life insurance policy, you should be doubly careful and keep your life stage and age in mind. Getting life insurance is a necessity, but you should alter your strategy as per your circumstances to get the best possible benefits. Before we share some essential tips on how you can achieve it, let’s look at the various types of life insurance plans available to you.
A Guide To The Various Types Of Life Insurance
Knowing the types of life insurance policies in the Indian market is essential to better gauge their need in your portfolio as per your life stage and requirements. The following are the main types of life insurance policies available:
- Term Insurance – This offers life coverage to the policyholder for a particular duration or term. In case of their demise within the policy period, it pays out the sum assured to their nominees.
- ULIPs – These offer a combination of insurance and investment. While you get life coverage with the same features as life insurance, on the one hand, you also gain from investments made in market-linked instruments for accumulating future wealth.
- Traditional Endowment Policies – With these plans, you can get life insurance coverage and an opportunity to build up your savings.
- Whole Life Traditional Endowment Insurance Policies – These plans offer life insurance coverage for the policyholder’s lifetime, up to 99 or 100 years.
- Child Insurance Policies – These are plans to help build a future corpus for meeting your children’s educational and/or other needs. In case of the parent’s (policyholder) demise, the death benefit is paid out to beneficiaries.
- Pension Plans – These plans ensure life coverage while helping build wealth for retirement purposes. You can take a lump sum payout upon maturity or use it as a fixed periodic income post your retirement.
Now that we have gone through the various types of life insurance let us understand how we can plan our insurance portfolio per our life stage.
Age and Stage Wise Strategies for Life Insurance
It is a necessary first step to utilize an online life insurance premium calculator and determine how much you will have to pay for a specific coverage amount for a particular policy. Here are some age/life stage-wise strategies that you can follow-
- Young and Unmarried – If you are a young professional between 20-28 years of age, unmarried and single, you have very few responsibilities in most cases. This is a good time for you to get a term insurance policy that gives you good coverage at comparatively reasonable premiums since you are young, and the risks for the insurer are on the lower side. The sum assured need not be a hefty amount, but it should be sufficient to cover the lifestyle of your parents and family in the future. Alternatively, you can choose to invest in a suitable ULIP instead, to gain the dual benefits of building a corpus as well as enjoying the benefits of life coverage. Getting in early will also ensure that your returns are maximized, owing to the power of compounding.
- Newly Married – If you are between 25-35 and are newly married with increasing responsibilities, you will have to revise and tweak your term insurance plan to scale up the sum assured. You can also buy a new policy for your spouse. Choose an amount that covers the entire family’s financial needs down the line. Sometimes you can boost your current policy with suitable add-on riders and top-ups. If you have a ULIP plan in place, you can add your spouse to it if your plan allows. On the other hand, if you only have a term plan in place, it would be a good idea to start investing in a ULIP to build up a corpus as many new life goals arise after marriage, like buying a car or a home, and the accumulated funds from a ULIP plan can help you out in fulfilling them.
- Parenthood – Those between 30-40 years may have to fulfill increasing financial obligations towards their families. They will have to choose plans with adequate coverage for new members while covering the existing requirements of the family. You can also start investing in Child or Endowment plans to save early for your child’s needs. This is also the time when you should start planning for your retirement. Your existing investments might have been made in service to other life goals, but retirement planning is as essential as anything. You can consider the various pension plans that are offered, and make the most of the time you have on hand.
- Mid-forties – If not already done, this is when you should invest in child plans for the higher education of your children while also opting for ULIPs to meet your future goals, including retirement, buying a home, or paying off your home loan. You can also go for a term plan to get coverage for various liabilities like home loans or personal loans that you would have taken. Additionally, your retirement plan must be put in place.
- Mid-fifties- This is typically when people earn the most, with children almost close to independence or already put through college. Hence you can now go all out for retirement with pension plans.
The main goals of life insurance are to give financial security to your loved one and guarantee that your aspirations at various life stages are realized despite challenges in life. For a small additional fee, you can also choose to upgrade your policy with popular life insurance riders like critical sickness, accidental death benefit, and premium waiver, among others, as applicable.