Life Events That Could Affect Your Life Insurance Needs

Life stages/ events that affect your Life Insurance needs:

 

The different life stages or events which might affect your life insurance needs are as follows –

1. Marriage

Before marriage, you might have limited responsibilities because of fewer financial dependents. However, after you marry, you start your own family. Your financial responsibilities increase. You might want to buy a home or a vehicle or go on vacation to spend quality time with your loved ones.

These enhanced financial goals require a review of your life insurance coverage. Since the goals increase, your life insurance sum assured might also need to increase for effective goal planning.

At this life stage, you might invest in a term insurance plan to secure your family’s finances. If you have a term plan, a coverage review is important to understand whether the sum assured is adequate for the increased financial needs. You might also choose savings-oriented life insurance plans like endowment or unit linked plans to create a corpus for your enhanced financial goals.

2. Childbirth

The birth of a child is a joyous occasion. However, you cannot ignore the associated financial responsibilities that add to your shoulders. As a parent, you think about providing your child with the best nutrition, the best upbringing and the best education. All of these things need money.

Thus, after having a child, your financial goals increase with the inclusion of child planning. It helps you create a dedicated corpus for your child’s future needs whether or not you are around for the same.

3. Approaching retirement

When your children grow up and become financially independent, most of your life’s financial goals might be taken care of. This is the time when you approach your retirement age and have to plan for your old age. In this life stage, retirement planning takes centre stage, and your life insurance needs also change.

At this stage, you might consider deferred annuity plans to build up a corpus for retirement. Other savings-oriented insurance plans, like endowment or unit-linked plans, can also help you create a retirement fund.

4. Retirement

After you retire, you need a regular source of income to meet your everyday living expenses. Plus, you need funds for your medical needs and also to plan a legacy for your loved ones. In this stage, an immediate annuity plan can help as it pays guaranteed lifelong pensions to create a source of income. Moreover, if you choose the return of purchase price annuity option, you can also leave behind a legacy for your loved ones.

 

When do you want to consider changing your life insurance options?

 

You might want to change your life insurance plans or the sum assured when your financial needs change. This happens when you enter a new life stage. In such cases, you can review your life insurance coverage and check whether you need a new plan for new financial goals. When it comes to reviewing your life insurance coverage, assessing its adequacy is important. You should know whether the sum assured would be sufficient to pay for your enhanced financial goals. A basic thumb rule states that the basic sum assured of your life insurance policy should be 10X of annual income1. So, at the different life stages, you can check whether the existing coverage fulfils this rule or whether you need to increase the coverage of your policy.

 

Best age to buy Life Insurance:

 

There is no specific age that can be considered best for buying life insurance. However, it is better to buy a life insurance policy from a young age for two main reasons. Have a look –

1. Firstly, when you buy the plan at a young age, you can get lower premiums because premiums are lower at lower ages2. You can lock in the lower premium over the policy duration and enjoy affordable coverage.

2. Secondly, when you buy a plan early on, you can get early coverage, too. Unexpected contingencies might strike anytime, and when you have a policy covering the risk of premature demise, your family will be financially taken care of.

 

Conclusion

 

The only thing constant is change. As your life stages change, your insurance coverage should, too. Assess your financial needs at different stages of your life and adjust your life insurance coverage accordingly. An annual policy review is recommended to check whether your life insurance policy is relevant to your financial goals. This can help you make the necessary changes so that you are adequately insured and financially secured.

So, keep a tab on your life insurance policies and know how to change them at different life stages.

 

FAQs

 

1. Can I increase the sum assured of my term insurance policy?

Under most term insurance policies, the sum assured, once chosen, cannot be increased or decreased during the policy tenure. However, many plans offer the facility of enhancing the sum assured at important life events, viz., marriage and childbirth. If your plan offers this facility, then you can increase the sum assured after you get married or have a baby. However, if this facility is not available or if you want to increase the sum assured at any time, you can buy a new term insurance plan and increase the aggregate coverage.

2. Can I buy multiple life insurance plans?

You can buy multiple life insurance plans without restrictions. However, when buying two or more policies, disclose the details of your existing life insurance plans for appropriate underwriting of the policy.

3. Can I switch to another type of life insurance policy when my financial needs change?

Switching to another life insurance policy during the ongoing tenure is not possible. You will have to surrender the current policy and buy a new one. Surrendering is not beneficial since you get a reduced value from the policy, and the coverage benefits also cease.

Instead of switching, it is better to add new insurance policies to your portfolio when your financial needs change. This way, you will not lose out on the benefits of the existing policies.

4. When is the right time to review life insurance coverage?

Any time is the right time to review your life insurance coverage. If you have not reviewed your policy before, it’s time to start. Moreover, a regular review is essential to ensure that your policy is suitable and optimal to fulfil your changing financial goals.

 

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