Experts say that the need for life and health insurance evolves over the life span of an individual.
Insurance needs change with the stage of life. For example, the needs of the young professional and the retired person could be different.
An adviser needs to keep in mind the age, liability, marriage and number of dependent members while working on a comprehensive insurance plan. Given the importance of insurance in providing protection against untowardly incidents, insurance planning that looks at the life stage of your clients needs to be done.
Young professional - In this life stage, young professionals may have less liability as they will still have parental support. They might be paying off for their education loans but their liabilities, debt and expenses are lower than the married person. Experts say that health insurance and savings is more important at this stage of life.
Married with or without kids - Expenditure and liability is quiet high in this stage. It may be possible that the couple is planning for a home loan or having liabilities like children education, paying installment of car loans etc. Experts believe that the insurance need in this stage is very high because of high expenditure, debt, family liability and low savings. Term and health insurance products are necessary in this stage.
Pre-retirement - Children are generally financially stable in this stage of life. Debt is reduced and expenditure is controlled in pre-retirement phase. The major financial need is saving for retirement and protection of dependent members. Advisers feel that retirement planning with annuity products and saving instruments like ULIP scheme could be recommended in this stage of life.
Post retirement - Debt is usually paid off or is very marginal in this stage of life. It is very important to utilize the accumulated wealth in an effective way so that a retired person could maintain a healthy life. The main financial need is regular income and medical treatment. Experts believe that annuity products and adequate health insurance coverage are more appropriate at this stage.
Prakash Praharaj, Founder of Max Secure Financial Planners emphasizes the need of health and accidental insurance coverage for young professionals and term insurance for young couples, with or without children. “Expenditure and liabilities are quiet high in this stage of life and hence both life and health cover are required. If client’s spouse is also earning then need of life insurance somehow declines but health coverage is important for both.”
Prakash believes that in the pre-retirement period stability for future takes priority over life coverage. “Life insurance coverage in post-retirement period is not a good idea. However, contribution towards health insurance should be increased by three times. A minimum health insurance coverage of Rs 10 lakh is needed at this stage of life”, said Prakash.
Nisreen Mamaji of Moneyworks Financial Advisers feels that term insurance and health insurance products are relevant in all stages of life. She believes that life is dynamic and hence recommending the right product to someone through the ups and downs needs plenty of research. She said that the term insurance products provide coverage at low cost. “While working on a comprehensive insurance planning one must keep track on claim settlement ratio of insurance companies,” she added.
