Do you have adequate life insurance cover?
Your life insurance needs changes as you move from one stage to another in life. How do you assess the right insurance amount for you? Read on.
We often take insurance cover for a certain amount and forget. It is seldom that we reassess our life insurance cover. By doing so we run the risk of being under insured.
When you’re young, you typically have no need for life insurance, but this changes as your family grows and you take on more responsibilities. Then, as your responsibilities once again begin to diminish, your need for life insurance drops off. It is important that you keep track of our insurance needs and buy insurance cover that suits your need. Let’s take a look at how your life insurance needs change throughout your lifetime.
Insurance needs during School Days
Childhood is typically a time of no worries, no cares and no responsibilities. A child depends on others to take care of him/her, not the other way around. Although it would be tragic, a child’s death would likely have little financial impact on the child’s family.
Thus, there is generally very little need for life insurance at this point in an individual’s life. However, there are certain policies available that a parent can take to secure their child’s future.
Young singles and Insurance
As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not cause financial hardships for others. For most young singles, life insurance is still not a priority.
Some would argue that you should buy life insurance now, while you’re healthy and the rates are low. This may be even more important if you are at a high risk for developing a medical condition later in life. But you should also consider the earnings you could realize by investing the money now instead of spending it on insurance premiums.
Your life insurance needs increase significantly if you are supporting your parents or grandparents. In that case, life insurance would provide continued support for your dependants in case of any eventuality. If you have a loan or mortgage that is jointly held with a co-applicant, your death would leave the co-applicant responsible for the entire debt. You might consider purchasing term insurance to cover these debts in the event of your death.
Insurance for Newly wed
Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.
Once you buy a house, the situation changes. Even if both spouses have well-paying jobs, the burden of a housing loan may be more than the surviving spouse can afford on a single income. In order to make sure either spouse can carry on financially after the other’s death, both of you should probably purchase a modest amount of life insurance.
Again, your life insurance needs increase significantly if you are caring for an aging parent. Life insurance becomes extremely important in these situations.
Growing Insurance with Growing family
When you have young children, your life insurance needs reach a climax. In such a situation, life insurance for both parents is extremely important. Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous.
Both spouses should carry enough life insurance to cover the expenses that would result from their death. Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and expenses on childcare with the remaining income.
Get Insured while moving up the ladder
For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It is important to review your life insurance coverage.
You probably won’t be able to keep any life insurance that was provided by your employer. If you’re going to work for a new company, you might receive a comparable life insurance benefit. But if you’re setting up your own business, you’ll need to purchase an individual life insurance policy.
Make sure the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore.
Insurance for the golden years
Once your children have grown up, your life insurance needs decrease. You’ll live off your retirement savings, and hopefully you would have accumulated assets that can be passed on to your heirs when you die. Not only is life insurance expensive at this point, it’s probably unnecessary.
Are you adequately insured?
It’s clear that your life insurance needs change at various life stages. Based on specific circumstances, you need to assess your insurance cover. You can do this any time and most importantly, buy additional insurance cover in case you need it.
He has authored several analytical articles on personal finance in The Times of India and The Economic Times. Being a finance geek and having been involved with internet since the early days of the medium, he was a great help and source of guidance while formulating personalmoney.in. You can know more about Manish at ManishMisra.com
Disclaimer : Manish has agreed to write in his personal capacity. Views, opinions expressed in his articles are his own and do not necessarily reflect the views of his employer.PersonalMoney.in