When to review your life insurance cover

Started by Kalyan, Mar 07, 2009, 12:48 PM

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Kalyan

When to review your life insurance cover

Listed here are the stages in life during which you need to reexamine.

The need for insurance in today's over-strenuous life can't be overemphasized, particularly if you have financial dependents. However, just getting insured or buying a few insurance policies in the name of your family members is not enough.

You also need to review your insurance cover from time to time in a bid to ensure that you are adequately insured and your dependants are taken care under any unforeseen circumstances.

For instance, in the early stage of life when you have just started off your career, there is no real need for life insurance. However, circumstances undergo a sea change in late 20's or early 30's when you mature and get married. Then you need to assess your risks and buy/review your policies, just to ensure that your coverage is sufficient for your new needs.

Listed here are some of the stages in life during which you need to reexamine your insurance needs:

courtesy : economic times

Kalyan

Before Marriage


Generally, as already mentioned, a person who's just starting off a career in his 20s has no real need for life insurance, unless he has financial dependants. This is because the likelihood of death from natural causes is way too low to require a financially unencumbered person to take on life insurance.

However, if one is doing marketing and has to go on field for work, then one can prefer accidental or medical insurance in one's early stages of life.

"At this stage, however, one can go in for a whole life insurance plan or any other long-duration plan. Advantage is that at a young age the premium for life cover is low and health is generally good. Therefore, one can lock in a long-term life cover at a cheap premium with very low risk of health extra charges," says Ashish Kapur, CEO, Invest Shoppe India Ltd.


courtesy : economic times

Kalyan

Post-Marriage

After marriage one needs to review one's coverage to take adequate life cover in a bid to protect one's spouse and family from the risk of premature death.

If the spouse is working, then her income earning capacity also needs to be protected and if she is a housewife, she needs to be given adequate protection which could safely tide her over any financial crisis that might occur in the absence of the breadwinner.

At this stage some critical illness cover is also required, so as to cover one against any mishappening which may lead to non-performance of job for some time.

courtesy : economic times

Kalyan

Starting a family

This one may seem a little more obvious, but in the excitement of planning your nursery or picking baby names, you may forget to adjust your life insurance to your new needs.

In addition to other important forms of insurance, such as health insurance, it is important to make sure that you will be able to take care of your kids financially.

As insurance also provides cover for foreseen future expenses such as children's education and marriage, it's advisable to go for a suitable plan and take adequate cover for your kids, depending on their future needs.

Also, if your wife plans to relinquish her job to bring up junior; enhance your cover—you have a second dependent now. However, if your wife plans only for a temporary vacation; do not go overboard with adding insurance cover.

courtesy : economic times

Kalyan

Adding Liability

As the person grows older, he starts accumulating assets on loans, like buying a dream house or a car. However, this also increases his liabilities which acts as a trigger to go for a larger or new insurance cover.

"If someone has a large amount of liabilities, he should increase his insurance cover. There are policies which cover the liabilities of a person and pay all the liabilities if something happens to the insured. Hence the burden is transferred to the insurance provider, and not to the family of the insured," informs Kapur.

Experts suggest that while taking care of your liabilities, you should also take stock of all your plans and if you have some unmanageable life policies, it is better to junk some low-cover, high-premium policies and take a huge term plan instead to cover your liabilities and additional needs. This way you can save on premium and get some additional cover too.

courtesy : economic times

Kalyan

Change in lifestyle

Besides increase in liabilities, a hefty rise in salary/income and the urge to maintain the current lifestyle in future also induce people to review their insurance needs and opt for a larger cover.

For instance, if someone who used to get Rs 300,000 annually and has started getting Rs 500,000 now, would surely like to at least double his cover to protect his additional income earning capacity.

In addition to this, there are many factors that contribute to your life insurance costs. Some of them relate to poor health, obesity, smoking, occupations and lifestyles. If any of these change during your life, you should reexamine your life insurance policy.

courtesy : economic times

Kalyan

Never insure too much

However, while reviewing your cover from time to time, you should also keep your premium paying capacity in mind and should never go for any cover blindly.

"At the time of buying life insurance, individuals err by insuring either too little or too much. Some individuals who insure themselves for a small amount are vulnerable to unbearable financial loss at the time of an unfortunate event. On the other hand, if the individual insures too much without analyzing the extent of his risk, he may be paying for losses that otherwise could be economically retained. So, one should only buy insurance to the extent of one's ability to pay for it," says U S Roy, MD & CEO, SBI Life Insurance.

If not, you may just end up adding unwanted and lapsed policies to your portfolio!

courtesy : economic times