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Does a Life Insurance Policy Change with Changing Times?



One has heard the word insurance commonly used in English. So what does this word signify? When one uses the word insurance it means a backup mainly a support in difficult times. Similarly a life insurance policy is a support in times when one cannot help his family mainly when he is not around. An insurance policy coupled with tax benefits is surely one of the best financial products around. However can one just purchase an insurance policy for the heck of it or just to save tax without checking its compatibility to his needs? Looking at the sheer number of policies being surrendered makes one wonder whether any attention is paid to this very important aspect. Remember life insurance is costly but lack of it can cost ones family his home and children their education. Life insurance is not what you buy. It is an instrument to carry out your plans.

Life Insurance Policy change beneficiary:

Should one purchase a life insurance policy if he has no dependents?

Whenever one decides to purchase any article or a gadget the first question that pops up in his mind is Do I require this instrument? Is there a cheaper substitute available which can provide the same benefit or even better? The same question must run through one’s mind when he purchases a life insurance policy. Life insurance is a support to one’s dependents in his absence. If one has just started working and is not married the purchase of a life insurance policy is simply a waste of money. One can look towards a personal accident policy and a health insurance policy which are more suitable to his needs at this point in time. This is a must if even one’s Company provides a health cover as in these recessionary times job security is a rare thing. One can get these policies at a low premium as he is young and healthy. Do not pass a single day without health cover. However if one has taken an education loan or has dependent parents then a term life insurance policy can certainly help his cause. Remember Always know what you purchase and why you are purchasing it.

Should one purchase a life insurance policy when he is just married?

One is just married and this is a time in which life insurance plays a very important role. A term life insurance plan is a must have at this point of time in life. This is a simple mortality cover which provides a death benefit or a sum assured on payment of a premium. There are no survival benefits. The premiums are very low as one and his spouse are young and healthy and there are scores of online term plans which are cheap. However one needs to note that these are vanilla plans or basic plans .If one wants rider benefits such as a critical illness rider obtained on paying a slightly higher premium then a traditional term policy is a must. At this stage one needs to have a term life policy perhaps with a critical illness rider. One also must upgrade his health insurance policy to a family floater policy. A personal accident policy is a must at this stage. Remember you speak of life insurance as a luxury. Do you consider food, clothing and shelter luxuries? They are what life insurance provides. This is a method of wealth transfer to one’s spouse in case he dies young. Remember life insurance offers a man the only way where he can make his will before he makes his money.

What is the need of life insurance when one has children?

  • One is married and has children and his priorities in life have changed. One is now at the crossroads of life. This is a time in which the decisions made have long term implications. The same holds true for life insurance decisions and one has to be precise in which policy he chooses. One needs to upgrade his family floater health policy to cover his children along with his spouse. One also needs to remember that if he is a heavy smoker or suffers from lifestyle diseases his health insurance as well as his life insurance premiums would shoot up. A critical illness rider is a must have in ones term insurance policy along with a personal accident benefit rider. These policies pay up when one suffers from a critical illness say a heart attack or is disabled in an accident and is unable to work and a lump sum is provided to tide over the crisis.
  • This is a stage in which one mainly avails a home loan and one would not like to leave this EMI burden on his dependents. A level term life insurance policy protects one’s dependents from the home loan liability. One needs to insure himself for an amount equal to 10-12 times his annual income as well as add the home loan or a car loan liability to these amounts.
  • A home is a roof over one’s head and a refuge in a storm. It is also a once in a lifetime purchase as a home cannot be purchased again and again. A protection for this dream home is a must. One can take a home insurance policy which pays up if there is a structural damage to one’s home caused due to natural calamities or a fire. Considering the basic structure protection policy costs about INR 50 per Lakh insured per annum this is a must have policy in ones portfolio. One might have costly jewelry and other valuable assets whose replacement can cost quite a sum. A householder’s package policy insurers the contents of one’s home. The contents of the home can be insured against theft of valuables such as jewelry, electronic items, costly crockery, electrical appliances, paintings and damage to doors and windows.
  • Children’s education and providing a fruitful career is a parents dream as well as a burden in these inflationary times. A children’s endowment policy is a must have along with a waiver of premium rider. One pays a slightly higher premium than a regular child endowment plan and takes up this policy. If one were to die before the maturity of the policy one’s child who is the nominee would get the sum assured. The insurance Company would pay the remaining premiums on ones behalf after one’s death and continue to keep the policy in force. On maturity of the policy a second payout is made. This is a guaranteed lump sum amount. The insurance Company pays one’s nominee a second time.

There is a famous saying You don’t buy life insurance because you are going to die, but because those you love are going to live. One sets his financial goals early and devices methods to obtain them. Life insurance should definitely play an important part in ones financial goals.

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