Your life cover needs tweaks at dif­fer­ent stages of life as your li­a­bil­i­ties and risk pro­file change

India Today - - SMART MONEY | INSURANCE - —Naveen Ku­mar

Life in­sur­ance is a boon that helps an in­di­vid­ual’s fam­ily cope fi­nan­cially in case some­thing hap­pens to them, es­pe­cially if they are the fam­ily’s sole bread­win­ners. An ad­e­quate life cover not only helps with the day to day ex­penses of the fam­ily of the de­ceased, but also long-term goals such as ed­u­ca­tion and mar­riage. The nec­es­sary in­sur­ance amount can change as a per­son’s fi­nan­cial po­si­tion, in­come, ex­penses, fam­ily struc­ture and num­ber of de­pen­dants change. “Look­ing at the life cy­cle of a hu­man be­ing, if one doesn’t re­view the life in­sur­ance cover at var­i­ous stages of life, one might find them­selves un­der-in­sured, which could pose a chal­lenge to their fam­ily when they are not around,” says Rakesh Goyal, di­rec­tor, Probus In­sur­ance Bro­kers. So, what are the var­i­ous life stages

when you should re­view your in­sur­ance po­si­tion?


When you are sin­gle, your ba­sic aim is to pro­vide fi­nan­cial pro­tec­tion to your de­pen­dant par­ents to en­able them to en­joy a stress-free re­tire­ment. One thumb rule to fol­low for ideal fi­nan­cial pro­tec­tion at this point is to buy an in­sur­ance cover that is at least 10-15 times your an­nual in­come.


Mar­riage brings with it a whole set of fresh re­spon­si­bil­i­ties. “Af­ter some­one gets mar­ried, they need to have an ad­e­quate life cover to pro­tect their spouse and fam­ily from the risk of pre­ma­ture death of the bread­win­ner,” says Ra­chit Chawla, founder and CEO, Fin­way. If you choose to con­tinue with the pre­vi­ous in­sur­ance for your par­ents, you could con­sider in­creas­ing it by at least five times your an­nual in­come. Else, you could take a new in­sur­ance cover of up to 10-15 times your an­nual in­come to pro­tect your spouse.


With all the joy that chil­dren bring comes the re­spon­si­bil­ity of pro­vid­ing for them. “In­sur­ance cov­er­age needs to be re­viewed again when you have kids. It is im­por­tant to make sure that you will be able to take care of your kids fi­nan­cially,” says Chawla. And with ris­ing ed­u­ca­tion costs, you have to en­sure that the goal is re­alised even if some­thing hap­pens to you. To do so, you may need to in­crease your life cover again by five times your an­nual in­come for each child.


It is quite com­mon for peo­ple of a cer­tain age to take on a home loan to put a roof over their fam­ily's heads. Such loans are huge and have long tenures—and a pre­ma­ture death can leave your fam­ily un­able to pay it back and pos­si­bly lose the as­set. “An in­crease in li­a­bil­i­ties, like a home loan, serves as a trig­ger for higher in­sur­ance. If you don’t re­view it, the sum as­sured could prove to be in­suf­fi­cient, and the life in­sur­ance plan would be of no use,” says C.S. Sud­heer, CEO and founder, In­di­ There­fore, it is im­por­tant for you to raise your in­sur­ance cover by the same amount as your longterm li­a­bil­ity.

As peo­ple progress in their ca­reers, they also ac­cu­mu­late as­sets. Their fam­i­lies, there­fore, do not need money for build­ing such as­sets. Some as­sets, like fi­nan­cial in­vest­ments and prop­er­ties, also be­come a re­source to fall back on. The higher the as­set value, the lower your fam­ily’s need for in­sur­ance. So, typ­i­cally from mid-40s on­ward, you may not need to in­crease your life cover as your as­set creation can re­place in­sur­ance, and you can con­tinue with the ex­ist­ing cov­er­age level.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.