Insurance is nothing but a transfer of risk from one party to the other, made at a pre-determined cost. As life progresses, an individual is introduced to new risks and relieved of old ones. In other words, every new phase of life brings with it a set of new risks. Thankfully many of these can be covered and you should be well aware of the benefits available to you. For this, you need to understand your insurance requirements and when they change and how.
Understanding the requirements
Insurance is broadly divided into two groups - life insurance and non-life insurance. Both these kinds need constantly re-evaluation as much like your life and possessions, these aren’t static either. When a person is in school, he/she leads a pretty carefree life with no one dependent upon him/her. But once out of school and employed, the individual begins to undertake new responsibilities for which insurance is greatly needed. Listed below are some of the important junctions of life at which the insurance requirements need to be re-considered.
1. Marriage - A single person may have very little responsibility towards his/her family. But with marriage, the person needs to support his/her spouse and needs to provide for the expenses of the household. It also becomes his/her responsibility to secure the lives of the family members in case he/she dies. Therefore marriage is considered to be the first major point at which insurance needs should be considered.
2. Birth of a child - A young couple may not require a lot of insurance coverage if they are working and doing well for themselves. But everything changes with the birth of a child. With rising education and healthcare costs, no parent can risk having the future of their children unsecured. Welcoming a child (or children) into a family is another important milestone for insurance re-evaluation.
3. Climbing up the professional ladder - Once you begin earning more, your cost of living also goes up. So, a previously bought insurance cover may not be sufficient for your family in the event of your death. Thus, you must re-consider your insurance needs every time you get a promotion or your income increases considerably.
4. New possessions - This goes without saying, but every time you purchase a new car or house, or even an expensive household item (painting, carpet, etc) you need to look into the insurance options to make sure everything is covered.
5. Passing of beneficiaries - If one of your beneficiaries happens to die before you, it is very important to re-evaluate your insurance plan. You need to make the changes and either nominate a new beneficiary or change the percentages of the cover available to the other beneficiaries.
Insurance should never be seen as a compulsion. It is a tool made available to you for your own benefit, and you must get the most out of it. You also must use it wisely. Make sure you don’t end up paying premiums for redundant policies that won’t deliver when you need them to. So at every important juncture of life, re-evaluate your insurance needs and make sure you pay the right premiums for the right policies.
The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal
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