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Pick the Right Insurance Policy

Insurance requirements vary with every stage in life. Whether starting a family, for children’s higher education, or for retirement, needs are seldom the same.

By: Ramya Ramachandran | 
Read Time: 4 minutes, 48 seconds | 
Last Updated: 17-01-2022
Pick the Right Insurance Policy

Insurance requirements vary with every stage in life. Whether starting a family, for children’s higher education, or for retirement, needs are seldom the same. A proper financial planning is thus required, to ensure that there is adequate financial security at all times and enough liquidity to meet one’s financial goals. Here’s helping you choose the right insurance plan, to optimize benefits and give you more peace of mind.  

The Stages of Life

For the ease of financial planning we could divide one’s life into 5 broad stages:

1) Early Years

2) Newly Married

3) Family Time

4) Middle Age

5) Retirement Years


Each of the stages has different inflow and outflow of money. Here is a peek into each one of these stages to help you understand your requirements.



Stage 1: Early Years of Earning (20 to 30 years)

Single and unmarried, this is the stage with high disposable income and low financial responsibilities. Typical financial goals could be

§         Continuing higher education or paying off education loans

§         Saving for a home and wedding

§         Tax planning


Ideal Mix of Insurance Plans:

With no dependents, this is the time for savings and wealth creation.

1) You could opt for Unit Linked Plans or Endowment plans, as per your ability to take risk, for wealth creation

2) A Term Insurance would be a good option for protection. Available at affordable premiums, this also provides tax benefits under Section 80C

3) Opt for a Health insurance plan for medical contingencies as well as for tax benefits under Section 80D



Stage 2: Newly Married (30 to 35 years)

This stage is characterized by rising incomes. With increased inflow of money, you would be able to save more too. This is the time for asset creation, grow wealth, and protect family. Financial goals typically would be

§         Planning for a home

§         Servicing of loans (home, car etc)

§         Tax Saving

§         Saving for Retirement


Ideal Mix of Insurance Plans:

1) It is not too early to start a basic retirement plan. Investing in a good pension plan ensures annuity on retirement. Remember, as you near the age of retirement, the premium rates also go up hence; it is advisable to start at an early age.

2) For your home loans, loan protection insurance would protect against monthly loan repayments, in case of death or unemployment due to disability.

3) Unit Linked Plans or Endowment would be a good option for protection as well as for investment.

4) Take a term life insurance for self and spouse, along with riders such as critical illness, accidental death benefit etc.



Stage 3: The Family Years (35 to 45 years)

At the forefront of liabilities, securing your family’s future is your top priority. Financial goals could be

§         Servicing a home loan

§         Tax planning

§         Saving for family future such as children’s education or marriage

§         Saving for retirement

At the peak of your career and income earning capacity, this is also a high expenditure stage with money being spent on children’s education, annual family vacations, loans etc…


Ideal Mix of Insurance Plans:

1) Invest in a good child insurance plan. For liquidity at various milestones of the child’s life, Money Back policies are ideal as they offer periodic returns. Alternatively Unit Linked Plans provide the option for liquidity, where units could be redeemed (either partly or completely) after five years.

2) A life insurance policy is necessary to ensure that, in case of an unfortunate incident, the family’s financial requirements are taken care of. Combination of a term plan plus a child plan, or endowment plan would provide protection as well as savings.

3) Take a health insurance policy for the entire family.



Stage 4: The Middle Age (45 to 55 years)

Closer to retirement, this is the stage of reducing responsibilities, with children becoming independent. Priority at this stage should be purely on retirement.


Ideal Mix of Insurance Plans:

1) For post retirement income, a life insurance deferred annuity scheme or a pension plan should be opted for.

2) Life insurance such as a term plan would be ideal for yourself and spouse.

3) Health insurance should be availed for self and spouse



Stage 5: Retirement years (55 years and above)

This is the stage where you have retired and are free of your responsibilities. Your requirement would be to have ample liquidity as your earning years come to an end.


Ideal Mix of Insurance Plans:

1) As you would no longer be receiving your salary, you would now require a regular flow of income from lump sum investments. Opting for single premium immediate annuity policies would be ideal at this stage.

2) Opt for plans that offer guaranteed returns as your risk taking capacity would have reduced considerably.

3) Health Insurance for self and spouse for medical contingencies.



A Final Word…

Insurance is a perfect tool to protect you and your family during times of contingencies. It is a very vital part of any financial portfolio and each person must have adequate cover for himself and the entire family. The underlying idea of this article is not only to protect yourself, but also to review your insurance requirements periodically.

Ramya Ramachandran
Ramya Ramachandran aggregates news on anything related to insurance in India. Keeps you updated.

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