Things to keep in mind while purchasing life insurance after 40 years of age
Life insurance is a basic financial need that should be a part of
one’s financial planning. Life insurance helps safeguard one’s family
and oneself against two types of financial risks – untimely death and
old age. The untimely death of a breadwinner places a family at a risk
for future livelihood expenses and the risk of living too long or old
age is that during retirement years the income-generating capacity of an
individual reduces significantly.
Protecting future income is very critical at every age of an
individual. Further, the protection needed also needs to be assessed
periodically to ensure that the amount of protection is in accordance
with the individual’s current income, lifestyle and future needs.
India has always boasted a younger population, however, every year this
“younger population” keeps ageing. To put this into perspective; India
has one of the largest millennial populations, estimated at 426 million,
and is approximately 34 per cent of the total Indian population and
forms approximately 47% of the total workforce. This generation has
started hitting 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
raised awareness levels in the last 2 years. Many individuals hitherto
resistant towards insurance are open to discussing and buying insurance
now, especially individuals with families along with liabilities like
home loans, etc. A large portion of this customer segment is in the age
bracket of 40-45.
It is very critical to evaluate one’s insurance needs and decide the
best insurance solution when looking to buy insurance while in this age
group.
- Term Life Insurance Policy: Since they are
currently breadwinners with higher disposable incomes this group has a
much clearer sight of dependents, future expenses and liabilities. Thus,
in cases where an individual has not taken a protection policy earlier,
it becomes very crucial to take one at this stage to safeguard family
needs. Further, even for individuals that have existing life insurance
plans it is essential to reassess one’s “human life value” and take
additional protection.
- Annuity or Pension Plans: Without
considering the disruption brought by covid over the last many years
life expectancy has increased; clubbed with a higher standard of living
and the need to be independent sufficient pension planning has become
more critical. In fact, the 40+ age group is ideal to invest in a
pension or annuity plan.
- Savings plans – ULIPs and Endowments:
Depending on the risk ability and need for future savings for
milestones, especially linked to children, individuals can consider
Savings cum protection plans available. Buying insurance policies for
children remains the most popular in this age group.
- Additional benefits and Riders:
Customers can also take plans that come with additional riders like
critical illness riders, disability and accidental death. This age group
is more aware of the need for protection against various risks and we
have seen individuals seeking out plans with additional benefits despite
the added cost.
Important factors to be aware of while making the purchase decision
- Age factor in case term plans: Depending on the
policy features, Sum assured availed and term the premium can be much
higher than that for a younger person. For pure term covers the premium
can be anywhere between 1.2 to 2 times the premium for an individual in
the age bracket 30-35. However, it is more important to note that risk
also increases with age and the increased premium should not be a
deterrent to taking sufficient risk cover if one can pay the premium.
- Term: The
term for which life cover is usually taken should match the earning age
of the customer. However, there are many policies that provide term
cover up to a higher age and even for whole life. Decisions can be taken
based on earning capacity.
- Medical Underwriting: As
mentioned above risk increases with age and an individual might need to
undergo medical examinations depending on Sum Assured and previous
medical history. It is crucial that the customer is aware of the medical
requirements and undergoes the underwriting requirements to prevent any
future hurdles in claim payments to the family.
- Deciding the most appropriate sum assured: This
is based on one’s human life value calculations and can also depend on
existing insurance policies and needs. Being underinsured can have
severe impacts on a family’s future in case of an unfortunate
eventuality.
It is very critical to note that it is never too late to avail of the
security brought by insurance protection for one’s family despite the
added costs. However, when one buys insurance at an age over 40, the
customer needs to ensure that they are taking the plan that best suits
their needs and provides sufficient coverage based on the current
financial situation.
