If you have a term life insurance policy to cover your dependants against an unforeseen event, that’s a good start. But how long since you have reviewed if it’s enough? If that appears like a long time, know that buying insurance is not enough; reviewing it periodically is what will make it work for you and your family.
Like other financial products, life insurance is not a one-size-fits-all solution. Your family’s needs will change as you progress through different life stages and as circumstances and liabilities alter.
Start Right
If you are in your 20s and do not have dependants, taking a life insurance cover may seem useless, but this is still the smartest time to get covered.
Unlike health insurance, term insurance premiums do not increase with age or any health complication that may arise later. “You are young and healthy, and premiums reflect that. Starting early means you lock in lower costs for the long haul,” says Sarvesh Kumar Mishra, chief third-party distribution officer, Generali Central Life Insurance.
Your responsibilities may be limited, but there could be liabilities like an education loan. Says Mishra: “A starting rule of thumb is to cover yourself worth 10-15 times your yearly income, but that number needs to be tested against your actual situation. In your 20s, somewhere between Rs 75 lakh and Rs 1 crore is a sensible base. Premiums at that age are low enough and going higher (on the sum assured) is not a stretch.”
Scale With Every Milestone
Review your insurance whenever a major life milestone or financial change occurs, such as wedding, children, buying or refinancing a home, job changes, starting or selling a business, divorce or separation, retirement, and any other significant changes in health or dependants.
After your wedding, your spouse’s financial security will at least partly rest on you. The birth of a child will expand that responsibility by two decades and will add significant costs.
