STRATEGIES AFTER BUYING A LIFE INSURANCE TERM COVER
· Bank fixed deposits can address short-term goals of 1-5 years.
· Mutual funds can address medium-term goals of 7-10 years.
· A child plan can aim at periodic payments as the child reaches its milestone years.
· Also, if the breadwinner dies, the contribution towards the savings will continue to be made by the policy, to enable you to achieve your saving target for the child even upon your death.
· Traditional policies are safer than Ulips, but with low returns because these plans have to invest over 90% in government bonds whose returns are below double digit figures.
· Ulips are the most risky insurance plans because the returns are linked to the Net Asset Value (NAV) of the securities in which the funds are invested.
· Moreover, the fund management charges of Ulips are the highest in the first few years.
· Hence, it is advisable to hold on to the Ulips until maturity to reap the maximum benefits.
DO YOU NEED LIFE INSURANCE AFTER 60?
· Life insurance is primarily meant to replace one’s income, so that dependents do not suffer a loss of income if one dies.
· The rationale for most policies offering insurance cover up to 60-65 years is that if the person does not earn thereafter, he does not need insurance.
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If you have a steady retirement income from your other investments, you could do without a life cover.
· However, you need life insurance beyond 60 if
o You are working after retirement and your family is still financially dependent on you.
o Your spouse is dependent on your pension which would stop after your death.
o You are repaying a loan or owe money to a friend or relative.
o You do not have sufficient wealth to pass on to your heirs, to whom your insurance can be a way to bequeath an inheritance.
· Buying insurance late in life is not cheap as the premium of a term plan zooms after you turn 40, and is prohibitively expensive by the time you are in your 50s.
· Besides, the options are also limited, with only a few companies offering term insurance cover beyond 65 years.
· You, therefore, need to assess your insurance needs, tenure of the policy and the risk vis-à-vis the premium paid in totality before buying one.
· Instead, one may opt for whole life plans which, though costlier, offer a maturity value.
· They also allow partial withdrawals from the corpus to meet one’s financial needs at any time during the term of the whole life plan.
· These whole life plans can be customized to suit the premium paying capacity of the policyholder, where the premium paying term is dependent on the entry age.