A life insurance policy may suit your needs, but does it suit your age too? This question we seldom ask ourselves when we consider buying an insurance policy. People of different age groups have different insurance requirements. Even with the passage of time the needs will continue to change, which will require separate responses. Thus, it is very important to select specific types of policies that will meet our requirements at that particular life stage. Now, take the case of Mahesh.

Mahesh, 35, is married with a son and has a monthly salary of Rs 50,000. He wants to ensure that his money is utilised effectively so that his future responsibilities will not be a burden for him. He is even considering insurance for this purpose. But it would be a challenge for him to find the right kind of policy and then allocate his insurance budget accordingly.

Analysis
Apart from the age, the amount of insurance is also an important factor in selecting an insurance policy. This will also be different for different people depending upon their exact circumstances. So, someone might need a cover of Rs 40 lakh while another would be fine with a Rs 25-lakh cover. This figure will also change over the lifetime of the person. We will come to Mahesh's case now. Mahesh has three main objectives - to get enough cover for himself and his family, generate good returns over the years and build up a corpus for retired life. Let us consider each objective in detail.

Family comes first
The 35-year-old Mahesh is a family man. His first target would be to ensure sufficient insurance cover for himself and his family. Since Mahesh is the breadwinner of the family, it is essential for him to set apart an adequate amount for the dependants so that their standard of living is not impacted under any circumstances in his absence.

A term policy would be a good option in this case. It will be available at a cheaper rate and in terms of the amount of insurance cover usually completes 75-80 per cent of the total requirement. Since Mahesh is young, the premium payment will also not be too high and this will be a significant benefit for him.

Better gains for better future
A term policy will take care of the protection part but what about income? There are other types of insurance policies that will fit the bill as far as a young person like Mahesh is concerned. The most popular among them are unit-linked insurance policies. These are actually long-term products and thus are suitable for people who have time on their side. The problem arises when people use them as short-term products whereby the objectives are not met.

For someone who is 35 years old there is a long time ahead in life and in such a situation Mahesh should select a ULIP that has a lower expense charge. In terms of insurance cover, around 10-15 per cent of his requirements can be met using this route. The most appropriate route would be to select the growth or the equity option as one can afford to take risks at this age. Hence the money can be in this risky area where the returns can also be quite high.

Securing the old age
Who doesn't want to lead a relaxed and gratifying life after retirement? Everyone wants to and so does Mahesh. But this can be possible with careful planning. Selecting an appropriate pension/retirement policy for this area and starting off the various contributions from the young age itself will ensure that a good corpus is built up by the time Mahesh has grown old and this is the basic objective of pension. Starting off early will be a big boost and hence for people like Mahesh who have some extra cash this is one type of policy that has to be started. Mahesh can ensure that a small part of his savings (5 per cent of insurance requirement) goes towards pension policies which also provide a life insurance cover and ensure that there is some element of safety being built up for the future too.

The author is a certified financial planner.