Insurance is one of the best financial tool to protect yourself, your family, as well as your valuables from unforeseen circumstances.  There are various types of insurance policies such as Life Insurance, Health insurance,Home insurance, personal accident insurance, auto insurance etc. While some covers, like those for vehicle and travel abroad, are mandatory, others need to be bought pro-actively.  And need for life insurance changes with time, for example a young person who is single with no financial dependents, having limited or no liabilities would not need Life Insurance , also a person who is retired and has done with his liabilites etc but a person who is in 40s married with kids would  increase his health insurance cover.From the time you start working till retirement, each lifestage calls for a review of your insurance portfolio.  Lets first see various kind of insurance one must have then we shall see what insurance policies typically make sense at which life stage.

Life Insurance

There’s never really a good time to die, but dying during one’s earning years is burdensome to those who depend on us for income and support especially if you have outstanding liabilities as well such as home loans, car loans  In today’s world your top priority should be to insure your life first, particularly if you have financial dependents as it is not wise to leave your dependents without any financial protection in case something untoward happens to you.  There are various types of life insurance ,our article  Life Insurance discusses the type of policies  in detail.

• Term Plans : is a no-frills, low-cost option to secure financial security for the family
• Endowment Plans : if policy holder dies during the policy term, nominee gets the sum assured plus some returns; if he survives the policy term, he gets back the sum assured and returns.
• Money Back Plan A portion of the sum assured is paid out at regular intervals. If the policy holder survives the term, he gets the balance sum assured.guaranteeing a regular flow of income at fixed stages in our lives
• Whole life plans A whole life policy covers a policyholder against death, throughout his life term as the name suggests unlike limited terms of the other plans.
• Unit Linked Plan : Unit linked Insurance Plan or ULIPs are life insurance and investment plans. Part of the premium paid by the customer goes towards providing the insurance cover and the balance is invested in venues of investment desired by the policy holder.

Life insurance is a must-have if you have a family that is financially dependent on you and if you are the primary source of income for your family. However, life insurance may not be necessary if you are single with no financial dependents and having limited or no liabilities.

Personal Accident Cover

Personal accident cover basically covers the risk of accidental death and permanent total disablement. Persons below the age of 40 have a bigger risk from death and disability due to an accident compared to any other risk.  Personal accident insurance provides an extremely low cost option of covering this risk

Home Insurance

A home insurance policy, also known as householders’ insurance, is the best bet to safeguard your house because “it not only covers the structure of your home but also all its valuable contents from different kinds of perils such as earthquake, terrorism, flood, burglary and house-breaking,

Health Insurance and Critical Illness Cover

A basic health insurance policy is one that pays for your hospitalization.

Health policy such as critical illness give you a lump sum if you contract a pre-specified medical condition such as cancer, stroke and kidney failure. The benefit amount is payable once the disease is diagnosed meeting specific criteria and the insured survives 30 days after the diagnosis.Although a health insurance policy covers hospitalization expenses, critical illness involves a lot of expenditure even when the person is not hospitalized. Prof Pattu of FreeFinCal Critical Illness Insurance Policies: Do You Really Need One? talks in detail  critically about Insurers have a narrow definition of many critical illnesses. So there is absolutely no guarantee that even if a person is diagnosed with an illness listed in the policy document, he will received the sum insured.

Insurance as per Life Stage

Let’s see What insurance policies typically make sense at which life stage with examples for cover and premiums. Please note that  cover, premiums are indicative, they will vary among insurers and as per a person’s situation or needs.

Insurance for 25 YEARS, Single and Employed

Life insurance: If you have no financial dependants you don’t need to buy a life cover. but if you support someone or have taken an education loan, you may need one. The best option would be an term plan till retirement. The amount should be 5-6 times your annual salary.For example for a non-smoker male with a monthly salary of Rs 30,000, if goes for cover of Rs 20 lakh, premium term of 30 years, annual premium for Online Term plan comes to around 3400 (offlice around 4400 Rs)

Health insurance: You’re likely to be covered by your employer‘s group insurance, but given the rising cost of medical care and the fact that you could becoverless between jobs, it‘s better to have your own medical insurance. Besides, the premium will be Lower at this age. For example if a 30 year old male takes a cover of Rs 3 lakh for 1 year premium would be Rs 4,000

Personal accident & disability covers: It will help ward off any loss of income due to a mishap, including partial or  total or temporary or permanent disability. For example for Personal Accident cover of Rs 25 lakh premium for a year  is Rs 1500 , for Disablity cover premium for a year is Rs 1600.

Insurance for 30 years Married, No Kids

Life insurance : If  your spouse is not working then it is must else it’s optional but  it’s better to your ensure life.  For a cover of 20 lakh term of 30 years annual premium would be around Rs 4,200

Health insurance: Convert your policy into a family floater plan. which will cover both you and your spouse at a lower premium than individual plans. For example if a 30 year old male with a 27 year wife takes a family floater cover of Rs 3 lakh for 1 year premium would be Rs 4,800

Personal accident & disability covers For example for Personal Accident cover of Rs 25 lakh premium for a year  is Rs 2000

Property insurance: You may not have a house of your own, but cover the contents of your house, including electronic gadgets, jewellery, etc.

Insurance for 35 year old Married with Kids

Life insurance: At this stage you have kids, have taken a home loan, car loan so your cover should be increased to take care of your increased liabilities. If your wife is working , she should also take life insurance till at least 60 years. For example for a male earning Rs 75,000 with two kids, having a home loan of Rs 30 lakh and a car loan of Rs 4 lakh , life insurance should be for 80 lakh and premium for 25 years term plan is around Rs 9,500.

Child Plan : At this time many people buy a child plan for kid’s education or marriage,. While it offers a cover and a lump sum on maturity, the premium is high. A child plan for 4-year-old with a cover of 40 lakh, premium paying term of 15 years annual premium is around Rs 60,000,on maturity it will yield around 10 lakh ‘

Health insurance : At this stage, you will need to increase the cover of your family floater plan to include your children. Many also consider a critical illness rider, which will cover the risk of major illnesses like cancer, heart attack, etc. For example if a 35 year old male takes a family floater cover of Rs 5 lakh for 1 year premium would be Rs 10,000.

Personal accident & disability covers : One can continue with one’s existing covers.

Property insurance : Insure your house against damage. You’ll also have to review the contents and raise the cover, if needed. A cover of around 50 lakh would have annual premium of Rs 5,000.

Insurance for Middle age 45-50 YEARS with older Kids

Life insurance: During these years, you are unlikely to need fresh insurance unless you take a loan or act as guarantor for your child’s education loan so one can continue with your existing cover . It will also be the period when you start to cash in on your endowment policies or child plans.

Health insurance: This is a critical period since you are likely to start facing medical problems. To ensure you retain the health cover and critical illness rider/cover, pay the premium so that the policy does not lapse. If it does you‘ll have to pay a high premium, take medical tests, and pre-existing diseases will be covered only after the waiting period.

Personal accident & disability covers : One can continue with one’s existing covers.

Property Insurance : Continue with your existing covers for property insurance. One can raise it to account for inflation or  rise in contents.

Insurance at Retirement

Life insurance : By this time, you would have stopped earning. your children would be financially independent, most of your liabilities including loans and debts would have been paid and you would have built assets. So when the life cover‘s term ends, you won‘t need to buy more.

Health insurance This is the most crucial period for your health as your medical expenses are likely to comprise a big chunk of your outflow. So, ensure your premiums are paid regularly.

Personal accident & disability covers : Since you would have stopped working and would have sufficient assets by now. you won’t need to buy a fresh plan.

Property insurance As you need to protect your property and its content, you should continue with your property insurance. Review to account for inflation and increase in contents.

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Related Articles :

• Checklist for buying Life Insurance Policy
• Mixing Insurance with Investment
• Mis-Selling or Mis-Buying: It’s My Money, My Responsibility
• Discontinue Life Insurance Policy: Surrender,Paid Up,Loan
• Basics of Insurance

Do you believe in taking insurance? What type of insurance is a must? What type of insurance have you taken?