The role of insurance policies in financial planning during various stages of life
One cannot deny the importance of insurance policies, especially life insurance policies, in personal financial planning throughout the life. Go through this article to know the importance of life insurance along with other insurance policies at various stages of your life.
When you are an young adult
At this age, you are self-sufficient and independent. You might have started your career and you are living on tight budget. At this age, you might not feel the importance of buying a life insurance policy. However, if you are healthy, the rates are lower. So, buying a life insurance policy at this age is meaningful if you are at high risk of developing a certain medical condition at your later age. But you might be thinking of investing the amount for other things instead of using the amount for insurance premium. However, if you have taken out a mortgage with a cosigner, then the cosigner will be responsible at the event of your untimely death. So, buying a life insurance policy can be a priority. Even if both you and your spouse earn, then also you should buy life insurance since one of your income may not be sufficient to take care of the entire household along with taking care of your children's education. Apart from this, having health insurance policies are also important for each of your family members so that you can afford proper medical treatment in need. You should also buy a home insurance policy especially if you've bought a new home.
In the career advancement years
Many of you switch job or start your own business. You must be aware of the fact that when you leave a job, your employer-sponsored group life insurance coverage will end. So, you need to be eligible for the group insurance coverage provided by your new employer, or purchase a suitable life insurance policy on your own. You might also be able to convert your group insurance policy to an individual one. However, while going for a life insurance policy, consider the growing needs, such as, college expenses, mortgage payments, etc. to buy the required coverage. You can also purchase a separate mortgage life insurance policy so that your family can stay at the property in your absence. You can also go for disability insurance policy so that you can get the benefits if you become disabled for a certain period of time.
During the pre-retirement years
The benefit of a life insurance policy is tax free and the growth is tax deferred. So, during the pre-retirement years, you can think of supplementing your retirement income with an amount of âtax free' income. You can go for universal life insurance policies for balance of savings, flexibility and investment choices, along with choosing from flexible benefits and premium schedules. Whatever you do, remember to buy a policy that remains in force without any lapse. At this stage, you can buy long term care insurance if you think your health insurance is not sufficient to take care of a chronic illness.
In the retirement years
After retirement, the primary function of a life insurance policy may be to supplement the income. The proceeds of a life insurance policy can be donated to a charity or you can also take out a loan from your whole life insurance policy for some expenses. You don't have to worry to repay the loan amount; however, if you do not repay, the benefit amount will get reduced.
Like any other insurance policies, while buying a life insurance policy, you should shop around and compare policies so that you can buy the most suitable one. If required, talk to an insurance agent and discuss the needs so that he/she can advise the right amount of coverage you need to purchase in order to remain stress free and enjoy life.