The life cycle of Life Insurance

Last Updated: Tue, Jul 31, 2018 12:00 hrs
Life Insurance (Image Courtesy: Bank Bazaar)

Life is divided into different stages, with texts dating back hundreds of years describing these stages. In India, most of us have heard about the four stages of human life, namely Brahmacharya, Grihastha, Vanaprastha, and Sanyasa. While we may not follow these stages to the T, they do play a role in our lives.

Now, while the different cycles might be blurred, we do have certain responsibilities towards people which makes our life extremely precious. It is for this reason that a number of us choose to buy life insurance policies, and just like our life, the life cycle of a life insurance policy can also be divided into different phases.

For those who are completely unaware about this, life insurance can be divided into four segments, each corresponding with the phase of life we are in.

  • No insurance (Early Life) – The primary reason someone buys a life insurance policy is to ensure that his/her dependants are not left in the lurch in case of his/her demise. In case of our early lives, most of us are the dependants, and as such do not require life insurance. The responsibilities on our heads during this phase are limited (atleast when it comes to finances), with someone else typically taking care of our needs.
  • While a few parents do opt to buy Children's plans, these are typically aimed at generating funds to provide for the education of the child when he/she reaches the next stage in life. It is safe to say that the phase of no insurance can last upto the age of 20 years.
  • Minimal insurance (youth) – Once you complete your basic education you are likely to start exploring the world. You might take up a part-time job, think about moving out of your parent's home, experiment in life, etc. Your responsibilities are limited to taking care of yourself, with it most likely that you don't have any dependants to look after. Given this fact, most people at this phase in life can do with minimal insurance cover. On the other hand, this is also likely to be the phase during which you end up buying a bike/car. As such, ensure that you insure the vehicle by purchasing a good motor vehicle policy. One could say that this phase in life lasts until one reaches the age of 25 years.
  • Comprehensive insurance (middle life) – So this is the time when most of us choose to settle down, get serious as to what we wish to do in the years to come. A number of us plan a family, look out for better work opportunities, start investing, etc. This is also the most testing phase of our lives. Bills, EMIs, work pressure, etc. are a part of daily life, and this goes on for a good decade or so.
  • Given the responsibilities, it is clear that a number of others might be dependent on us. This is why it makes the most sense to buy a good life insurance policy during this period. A number of us might choose to purchase a term insurance plan given the fact that it offers protection at affordable rate. Others might choose to invest in a whole life policy. Regardless of what the plan type is, it is imperative that one buys a policy.
  • One can also choose a base plan and add riders to it to enhance the cover. Another smart investment during this phase is to buy a good health insurance policy for the family, find life insurance here if you want to buy it.
  • Limited insurance (senior age) – Once the middle years pass by most of us see a drop in our responsibilities. Our children have probably grown into adults, looking after themselves independently. It is also likely that most of the loans we took in our earlier years have been paid off, with more disposable income in our hands. This is the period where we can relax. Most of us look forward to retirement, having planned something or the other. While one could say that there is no need for insurance during this phase, it would be wrong. It is good to have atleast a limited insurance cover during this period. One could buy a good retirement plan to ensure lack of money doesn't become a problem in the future.

Life is a gift which is meant to be enjoyed, and while we are not immortal we can ensure that even in our death we leave behind something for our loved ones to remember us by.

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