Increasing inflation, shift to nuclear families, and the fast track change in life style patterns throw a financial challenge which can be addressed only by life insurance. Your financial plan needs to be in sync with your life stage and the requirements that are very particular to your specific stage in life. The need for life insurance coverage changes with the change in your life stage. The same amount of coverage may not be sufficient when there is a change in your life stage. So whenever your life stages change, you need to re-evaluate your need for life insurance coverage. The following are the different life stages which demands for a revision in your life insurance coverage.
Dependent Parents:
If you are single and you have financially dependent parents, then you need to take life insurance even before your engagement. You can’t compare yourself with other singles whose parents are not financially dependent. You are in a unique life stage. In case of any mis-happening to you, your aged parents should not financially suffer. Keeping this in your mind, you need to take required life insurance coverage.
Newlywed:
When you are married, the need for life insurance increases. You need to cover yourself with adequate life insurance in order to financially protect your spouse. The right time for you to take the first policy is as soon as you get engaged.
New Baby:
You need to increase your life insurance coverage when you are blessed with a baby. You are responsible for the financial well being of the child, its higher education and wedding. As a responsible parent, you need to protect your child’s future with adequate life insurance coverage. As soon as your wife’s pregnancy is confirmed, you need to re-evaluate your need for life insurance.
New Home:
Whenever you buy a new home on mortgage, your outstanding liability goes up. In case of any eventuality to you, this financial burden falls on your family. So as to place your family in financial comfort, you need to take enough life insurance which covers the outstanding loan, maintenance of the property and property taxes to be paid. This coverage will make your new home a happy and peaceful home.
Job Promotion:
Job promotion results to increased income. Increased income paves the way to a better lifestyle. Your family needs this increased income in order to maintain that new lifestyle. As you need to protect your family’s new lifestyle, you need to re-evaluate your life insurance requirement.
New Debt:
All your debts like car loan, personal loan need to be covered with an insurance policy. Whenever you apply for a loan, you need to increase your life insurance coverage. You need to make sure that you are leaving assets for your family and not the outstanding loans as liabilities.
Children Education:
Policies on life of growing children especially those studying for expensive courses like engineering/medical/MBA’s from India or abroad since money outgo is fairly large
Changes in marital Status:
If your marital status changes because of death of your spouse or divorce, then you need to rework your life insurance requirement. The reason that, your family is solely depends on you now. Also you need to make necessary changes in the nomination of the existing policies in which you have nominated your spouse.
Business liabilities:
If you are a businessman, then your business liabilities are also an important factor in determining your life insurance coverage. All your trade debts and business loans are need to be adequately covered with insurance coverage. This will help especially when it is not a family business. Also insurance policies cannot be attached in case a decree is passed against a judgment debtor and it helps creation of a protection fund.
Post retirement:
After your retirement, you don’t earn from your work. So there will not be any financial loss for the family in case of any mishappening to you. So all your insurance policies can be closed or cancelled on your retirement. During your working life, whatever the policies you take, you need to make sure that the policy matures or closes on or before your retirement.
In a nutshell, understanding the life stage in which you are presently in, and taking the life insurance coverage that suits your life stage, gives you and your family a peaceful mind.
The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.
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