Life Insurance – a need based financial tool

The reason life insurance is such an important financial tool is because it is meant to protect your family and your dependants for financial support. But the immense significance of a life cover never hits home until it affects you on a personal level.

Who needs life insurance and when?

Most people are of the opinion that life insurance is only for those who have a family, but this is not true. Whether you are single or married, whether you are young or old, life insurance is an essential financial tool for all. We will be enumerating this point in detail in the below examples. This list will help you decide when it's time for you to start looking at your life insurance options.

What if I have no dependants, do I still need life insurance?

Yes, you do. Though life insurance is usually projected as a family’s financial security, it can also play other roles. In your absence, your life cover could make sure all your outstanding debts and other miscellaneous costs are paid off. But that is just term insurance. You can pay off your home loans and education loans through savings and investment life insurance plans. Through annuity plans, you can make sure you have a source of income when you retire. None of these options require that a person has a dependant.

At what stage in your life should you start considering life insurance?

At a younger age, life insurance premium rates are lower. But that doesn’t have to be your reason for opting for a life cover. Every individual has their own life needs, like debts, family responsibility, student loans, retirement, etc. The only person who understands your need is you. So, make sure to evaluate and prioritise your financial requirements and buy the life insurance policy that fits in with your needs.

What are these life stages?

Each stage of your life is defined by your major financial need during that time. In addition to identifying the need basis the situation, another way to determine this is by taking help from your Relationship Manager. Using these life stages, you can explore different life insurance options that will fulfill your need. We have listed some below that are commonly considered:

1. Starting a family

Life insurance should be purchased if you are considering starting a family. The premium rates will be lower now than when you get older and will help in maximizing your corpus for the time when the family needs it the most.

2. Established family life

If you have a family that depends on you, you need life insurance. This does not include only the spouse or partner working outside the home. Life insurance also needs to be considered for the person whose contribution inside the house is invaluable.

3. Being young and single

The reason a single adult would typically need life insurance would be to help support an elderly parent or another person they may care for financially.

Also it is best to consider purchasing life insurance while you are young to allow maximum time for the savings to grow.

4. Home loans and debts

Buying a life insurance policy that would cover your loan or debt would protect the interest and avoid you having to accrue more debt.

Life insurance can be a prudent way of ensuring that in case of an untimely demise, your estate may be cleared of any debts, which could be passed to your heirs.

5. Working couples who do not have children

You may not depend on your spouse for your financial security, but to leave them financially comfortable will also go a long way in easing your mental burden. There are scenarios where one working spouse earns more than the other where life insurance turns out to be essential to maintain a lifestyle.

Other scenarios:

1. If you have life insurance at work

Even if your organization provides life insurance cover, you should still buy your own life insurance policy. The reason you should never only rely on life insurance at work is because you could lose your job, or decide to change jobs and once you do that, you lose that life insurance policy. Furthermore the older you get the more expensive your life insurance becomes. Therefore it is essential to buy a small back up policy to make sure that you always have some life insurance.

2. Business partners and owners

If you have a business partner or own a business and there are people relying on you, you can consider purchasing a separate life insurance policy for the purpose of your business obligations.

Finally, always weigh your options before deciding to take a life cover. Take stock of your current financial situation, your family’s financial needs and your aspirations before deciding on a suitable life insurance policy.

Ensure a financially secured future for yourself and your loved ones with a wide range of Protection, Savings & Investment, Health, Children and Pension Plans.

These plans are available on HDFC Bank NetBanking (Life Insurance section), HDFC Bank website (Life Insurance section) or you can contact your nearest HDFC Bank branch.