Things to keep in mind when buying a life insurance policy after 40 [Boss Insurance]

Things To Keep In Mind When Buying A Life Insurance Policy After 40

Life insurance should be an essential part of a person’s financial planning. Life insurance helps protect yourself and your family against two types of financial risk: premature death and old age. The premature death of the breadwinner puts the family at risk of living expenses in the future, while the risk in old age is that during the retirement years the income generation of the individual declines significantly.

Future income protection is very critical at every age of an individual. In addition, the protection needed should also be evaluated periodically to ensure that the amount of protection is in line with the individual’s current income, lifestyle and future needs.

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India has always boasted of having a younger population, but every year this “younger population” continues to age. To put this into perspective; India has one of the largest millennial populations, estimated at 426 million, and accounts for about 34% of the total Indian population and forms about 47% of the total workforce. This generation has started reaching the age group of 40 and within the next 10 years the majority of this population would be in their 40s. The pandemic has also increased awareness levels over the past 2 years. Many hitherto insurance-averse people are now open to discussing and buying insurance, especially people with families with liabilities like home loans, etc. A large part of this customer segment is in the 40-45 age bracket.

Assessing one’s insurance needs and deciding on the best insurance solution is very important when looking to purchase insurance in this age group.

Term life insurance policy: Since they are currently the breadwinners with higher disposable incomes, this group has a much clearer view of future dependents, expenses and liabilities. So, in cases where an individual has not taken a protection policy earlier, it becomes very crucial to take one at this stage to safeguard the needs of the family. Moreover, even for people who already have life insurance plans, it is essential to reassess their “value of human life” and take out additional protection.

Annuities or pension plans: Disregarding the disruptions brought by Covid over the past few years, life expectancy has increased with higher living standards and the need to be independent and therefore sufficient retirement planning has become more critical. In fact, the 40+ age group is ideal for investing in a retirement or annuity plan.

Savings plans – ULIP and endowments: Depending on risk capacity and need for future savings for milestones, especially related to children, individuals may consider available savings and protection plans. The purchase of insurance policies for children remains the most popular in this age group.

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Additional Benefits and Riders: Customers can also take plans that come with additional riders like critical illness, disability, and accidental death riders. This age group is more aware of the need to protect against various risks and we have seen people seek out plans with added benefits despite the added cost.

Important factors to consider when making a purchase decision:

Age factor in time-limited plans: Depending on the features of the policy, the sum assured availed and the premium can be much higher than that of a younger person. For pure term covers, the premium can be between 1.2 and 2 times the premium for an individual in the 30-35 age bracket. However, it is more important to note that risk also increases with age and the increase in premium should not be a barrier to taking sufficient risk cover if one can afford the premium.

Term: The term for which life cover is typically purchased should match the income age of the client. However, there are many policies that provide term coverage until older ages and even for life. The decision can be made based on the earning capacity.

Medical pricing: As mentioned above, the risk increases with age and an individual may need to undergo medical examinations depending on the sum insured and medical history. It is essential that the client is aware of the medical requirements and complies with the underwriting requirements to avoid any future obstacles to the payment of benefits to the family.

Decide on the most appropriate sum insured: This is based on calculations of the value of human life and may also depend on existing insurance policies and needs. Being underinsured can have serious repercussions on a family’s future in the event of an unfortunate eventuality.

It is very important to note that it is never too late to enjoy the security provided by insurance protection for your family despite the additional costs. However, when buying insurance over 40, the customer should ensure that they take the plan that best suits their needs and provides sufficient coverage based on the current financial situation.

(The author is the Managing Director and Managing Director of Shriram Life Insurance)