Life insurance may serve as a long-term financial commitment and a means of financial support in the case of an unfortunate incident. Depending on your life stage and risk tolerance, goals can be achieved, whether for your children’s schooling, their marriage, creating your ideal home, designing a carefree retirement, or in times of financial crunch.
According to research, 36% of Indian families puting their money in life insurance choose to get term plans. Almost 29% of people are likely to get a life insurance policy after certain life events like marriage or having a child.
How important is life insurance coverage at various stages?
Lets take a look at various life stages and the importance of life insurance in each of them.
Ages 18 to 25
In India, nearly 90% of the young people don’t bother about getting a life insurance policy because they assume that they’re too young, or that it is an unnecessary expenditure. This is primarily because people in this age bracket tend to be in good health and have few, if any, financial obligations or dependents.
But experts contend that young people should purchase a life insurance policy as soon as they receive their first paycheck. You can buy a plan with a bigger sum assured when you are younger and pay a much lesser premium than you can in your late 30s or early 40s.
Now is the time to buy a flexible-term plan to enhance coverage as your obligations grow. Use a life insurance calculator to calculate the premium that you would need to pay over the years to receive a good maturity amount to buy your dream car, your dream holiday, and your dream house.
Age 25 to 35
The obligations grow because you may have settled into your career by this time. You can save money by availing life insurance tax benefits. You may likely be married at this point in your life. You may even owe money on credit card bills, a home loan, or a car loan. And the need for strong life insurance cover grows along with your liabilities.
At this age, you should start planning and making a financial safety net for your family to make sure they are always taken care of. Buying a term plan that offers a monthly income is preferable if you are purchasing your first life insurance policy.
Age 35 to 50
Your family is expanding, since you and your spouse might welcome a child, which will lead to more dependents. At this point, the significance of life insurance becomes even more apparent. While managing ordinary family expenses, you might also need to take care of the child’s educational costs and plan for the medical needs of elderly parents. Using a life insurance calculator could help you figure out how much premium you would need to pay based on your financial goals.
In this phase, consider purchasing a ULIP (Unit-Linked Insurance Plan) or any other type of life insurance policy that offers you good returns. A ULIP provides both life insurance and market-linked returns. Depending on your financial objectives and financial situation, you can invest in debt or equity funds to create a sizable corpus for the future.
To live a financially independent life after retirement, consider investing in a retirement plan, a policy that offers regular payments in the form of a pension.
50 years or more
Your kids will be adults by this time and have acquired financial independence. It may be time to prepare for your retirement, the second half of your life. Consider, though, that you may still owe money for things like a mortgage or a loan for a wedding. Then, expecting your family member to shoulder the cost of repayment while you are no longer around might not be realistic. Additionally, the unexpected loss of income could strain your family’s finances.
It might be wiser to purchase a term plan with less coverage if you are planning to purchase another life insurance policy as you get closer to retirement age. By eliminating your liabilities, you lessen the financial strain on your family and wouldn’t require a significant quantity of coverage. Additionally, your premium would be far less expensive with less coverage.
Note: There are two tax regimes that policyholders can choose from. Many exemptions and deductions are available under the old tax regime, while the new tax regime is said to have lower tax rates. Based on the tax regime chosen, one can determine whether they will be eligible for any life insurance tax advantages.
Being young and single, starting your first job, or retiring in a few years, whatever phase of life you are in, you should always have a life insurance policy in your toolkit. In different periods of your life, you can invest in various life insurance policies to increase your wealth and safeguard your family from any financial trouble that might come to them due to unfortunate mishaps. Life insurance brings with it the additional advantage of life insurance tax benefits and helps reduce the tax burden.