Be financially prepared FOR LIFE

Insurance cover is not a static need—it's something you need to customise to suit each stage of your life. We help you figure out how to do this

For most of us, our insurance portfolio consists of a term cover and a Mediclaim policy. This may not suffice, for an insurance cover should be taken as an effective antidote to our family's financial problems in our absence, adding to one's sense of security.
    Moving on with different roles—from a dependent child's to a provider's—our needs change. To keep pace with them, we need to re-examine and improve our insurance covers just as we need to re-jig our investment portfolios from time to time.
    "Buying insurance is subject to an individual's needs. The focus should always be the number of dependents, and how protected they are financially after his demise," says financial planner Amar Pandit. However, this may not be the only reason for buying insurance. Some customers think of insurance products as investment instruments, too. Thus, a host of insurance plans are woven around retirement, children's education, marriage, disability, and wealth creation. The basic benefits of insurance, however, remain the same—providing maturity benefits to a person who survives the end of the policy term, and death benefit to dependents in case the policyholder passes on.
    As you moves beyond single status, you can customise your insurance cover, much as one would move into a bigger home as one's family grows larger. This can be done by simply opting for multiple policies that cater to different needs, or buying policies of varying tenures. "Going for multiple policies is a better option, because you can take advantage of the latest insurance products available," says insurance advisor Parineeta Shetty.
    Younger people—those between 23 and 35—prefer unitlinked insurance plans (ULIPs). These investment-based insurance schemes offer good returns. The growth prospects of the scheme are tempting, especially after marriage, when one begins to look beyond just "me", and thinks about "us" as the core of any plan. However, the best bet here may actually be a term plan insurance plan. These work out the best if you have dependents, as they are cheap but offer a large cover.
    Interestingly, more policies are bought between September and March than during the rest of the year. This suggests that insurance plans are sought after for the tax benefits they offer. Other insurance schemes like endowment plans, which yield 8% to 10% over a fixed term, are popular too. In terms of returns, they may not be your best option, but if you're a risk-averse investor, the scheme provides the safety of assured returns. However, premiums for these schemes are much higher than those for term insurance plans. If liquidity is crucial, go for a money-back policy that pays back after specified periods. However, the returns on such plans are lower than the total premium, so they may not be as
good an insurance cover as an endowment plan.
    With new products hitting the market, look out for combination plans—a mix of term and ULIP—which give you back your premium, if not the insured amount.
    The birth of a child is an occasion for joy—and for additional insurance cover. Most children's plans are as much about investment as they are about insurance. Several of them keep your money locked up for a long period. Depending on how long it is before your child will need the money, many schemes offer attractive savings-linked or unit-linked plans. These allow you to get maximum returns on the sum insured. Most schemes consider parents as policyholders, and the child as a beneficiary.
    A child's education and marriage are two milestones that her parents should start working towards early in life. Many insurance schemes are designed for this. Some schemes give the child the sum insured plus full maturity benefits, even if the parent passes away before the term ends and
    some premiums
    are still unpaid. Schemes
    that offer returns in instalments over a period of time are also a good bet, since most will coincide with one's most important educational years. The proceeds can be used to fund those.
    If you travel or commute to your college or job, consider buying personal accident cover. In fact, this is one insurance plan meant for everyone, no matter what phase of life you're in, and whether or not you have dependents. An accident can wipe out your savings, and result in income loss until you recuperate. Worse, it could result in disability. So it's vital to be protected against accidental permanent total disability, permanent partial disability, and temporary total disability.
Some financial experts believe personal accident cover makes more sense than a life insurance policy, especially if you're young. The logic is that life insurance covers the risk of natural death, which is less likely to happen to those in the 25-30 age bracket.
Another health-related insurance product is Mediclaim, helpful in medical emergencies. In case of a sudden illness or accident, your policy should take care of hospitalisation, medical tests and other related expenses. There is a number of innovative products covering health—for instance, one lets you cover your entire family under a single policy, for a single premium. Another is the kind of health plan that returns over 90% of the sum insured in case the money was never used.
    Next on the agenda would
    be planning for the golden
    years. Your insurance kitty can
    be part of your retirement income, as various pension or annuity plans help build a corpus. This is useful after retirement, when there is no steady stream of income to absorb expenses. ULIPs backed by equities (which have been giving higher returns than any other investment avenue) can also be a source of income, although it's important to bear in mind that it is a high-risk, highreturn investment. Opt for it only if it fits your risk profile, because not many will take chances with money during years when there is no regular income.
    Today, innovation drives India's growing insurance market. There are as many products to choose from as there are needs that warrant insurance. The discerning customer thus needs to find a balance between using insurance cover as protection for his loved ones, as well as using it as an investment tool.

George Carlin  - "In comic strips, the person on the right always speaks first."