At 45 What Are The Life Insurance Plans Best Suited For You

Insurance protection is essential for every stage of life, whether you are a child, a college-going teenager, a young working executive or a retired person. Let us now turn to Shyam Sunder's case:

Shyam Sunder is a 45-year-old professional earning quite well. After having worked long and hard over his working life, he is looking forward to his retirement. Since he has earned a good salary with adequate savings over his lifetime, he is planning to retire in the next several years. His main concern is whether he has taken adequate insurance for his family's requirements, apart from investing in other instruments. Another concern is what type of policies his portfolio should contain.

Analysis

We saw that Shyam Sunder's aim is to retire early and live the easy life, for which he has saved a good deal of money and also done a fair amount of investment.

As he is nearing retirement, adequate financial safety has become a very important part of his entire financial planning. Since specific requirements related to insurance keep changing over the life of the person, Shyam Sunder needs to take them into consideration at all points of time.

At this age, Shyam Sunder would like to ensure that there is specific amount that will be available for the dependants in case there is a sudden unfortunate event. There is a double need for such an eventuality.

• Such an event could leave his wife without any regular flow of income.
• At the same time, there could be some expenses related to the children that might still have to be made.

Two common types of expenses here would be higher education cost and marriage expenses of the children. Adequate amounts need to be set aside for each of these so that there is no problem in meeting these requirement

Which policies can meet Shyam Sunder's requirements?

The logic that has to be followed is that there has to be a high insurance cover till he is working after which this has to be replaced by a high pension amount so that there is adequate protection available over the entire life. Thus some contributions should go towards a pension scheme.

Reasons to buy this policy:

1. Term policy
   Shyam Sunder's portfolio must have a term policy as it a pure protection and low-premium plan. It provides maximum benefit in the event of the insured's death. If he has not taken a term policy, looking at his goals, he can still opt for a short tenure plan (say 10 years) and secure his dependants' life. But as Shyam Sunder has less time on hand, he can go for a return-of-premium policy. In this policy, if a policyholder survives the policy, he gets back the entire premium as survival benefit.

    

    

   Point to be considered:
   Term cover gets more expensive as one ages. This means higher premium for Shyam Sunder.

2. Whole life policy
   This is one type of policy that would be useful for Shyam Sunder and should be considered if already not present in his portfolio. A whole life policy will pay out a specific sum on the death of the person. This means that the sum assured will be received at some point or the other.
   Point to be considered:
   As the payment is inevitable in this case, the premium would be slightly higher.
3. Money back policy
   If Shyam Sunder requires lump sum amounts at regular time intervals then a money back policy should suit his requirements as this will make money available to him at predetermined time periods. But he should keep in mind that the return on a money back policy is in the range of 2-4 per cent only.
4. Assured return policy
   This is one more policy Shyam Sunder needs to be actively considered. Here, he can choose those policies that yield slightly higher than the prevailing market rate can be considered because this will give him some good amount of money as well as some cover.Some of the policies available in the market are AEGON Religare Guaranteed Return Plan, Reliance Guaranteed Return Plan Series I – Insurance and Birla Sun Life Insurance Dream Plan.
   Reasons to buy this policy:

    

    

   1. There are times when the market situation is tough and at this time assured return schemes can save Shyam Sunder from a financial catastrophe.
   2. The overall attention has to be focused on the fact that there should be a large corpus available for Shyam in order that there is adequate pension being earned at the time of retirement. The amount from the assured returns scheme will help in this direction.
   1. While the main target of such a scheme is to provide a regular sum of money at the time of retirement there is also an insurance cover that is available when investment is made here.
   2. This will provide a double benefit for Shyam Sunder and he has to make all efforts to ensure that the maximum amount is contributed towards such scheme so that an effective pension that meets with his requirements is available.
5. Pension scheme

   The pension effort has to be at the centre of the financial planning of Shyam Sunder. Since he is planning to retire early there is likely to be a long time period for which he will live after retirement and this will require funds to maintain the existing standard of living.

Target:
Around 70-80 per cent of Shyam Sunder's pre-retirement income should be made available after retirement through various pension areas.