Selecting life insurance plans should be easy if you know what these plans can do for you. For example, health insurance will take care of your hospital bills and thus it’s easy to see why you need it in any case.

Similarly, various life insurance plans and even the benefits within these plans should help you choose a better plan as per your needs. Your choice of life insurance plans will depend on the following three factors: your age, family members dependent on you, and your annual income.

This leaves us with few distinct scenarios. Let’s see how your choice of life insurance plans would change as you move from one situation to another.

1. Below 30, Income Up To Rs. 50,000 p.m., No Dependents

This is the age when your saving habits are taking root, and from this perspective, this is a very important time of your financial life. This is also the age of living the income to the fullest, and often you find your income vanishing before the end of the month.

Key is to strike a balance. Remember that the habits of financial management you develop now will decide your financial status a decade later (or even for the lifetime). Thus, start following the golden rule of wealth – “Save first and spend later,” as soon as you can.

Now, the question, “where to save?” Here’s the answer:

• Get a Mediclaim and Critical Illness Cover – This will safeguard your parents’ savings in case you fall into a medical emergency
• Get an Accidental Death and Disability Cover – these two benefits are inseparable so will automatically follow each other in the same plan
• Get a Term Life Insurance Plan– you need a check for the specific benefit of growing term insurance plan, which allows you to increase your life cover upon marriage and childbirth.
• Build an Emergency Fund – While insurance plans will help you in case of any emergency, you will need to bear the cost of unemployment should it come to pass. So, with all the insurance plans in place, it’s time to start building a pool of liquid funds which can carry you for up to six months. Most emergency fund savings have to stay in either savings or super saver deposits for easy withdrawal in case of need.
• Start a Pension Plan – Retirement is a far-off goal, but the money you invest now will also provide the maximum growth to your retirement funds. Thus, start now even if small.
• Invest in 5 Year Tax-Saving Investments – These investment plans such as ULIP allow you to continue investing beyond the initial five years. So, just in case you do not need the money five years later, continue investing and enjoy growth. Else, you can withdraw the funds completely tax-free.
• Invest in Short-Term Funds – At this age, you will have plenty of short-term goals, and aspirations, which you want to accomplish within the next five years. Short-term investments will help you meet these targets. Also, remember this is not the same as your emergency fund.

Depending on your situation your allocation to these plans may differ. But, you should try to start as many of these as you can within this age, and specifically in the same order.

2. Between 30 to 40, Income Up to Rs. 1.5 Lakhs a month, Married

By this age, you should’ve already completed many of the previous milestones. However, if not, better make sure to meet all of them before moving to the life insurance plans in this age group. Also, there could be two scenarios here, one both you and your spouse are earning, or two only you are earning.

Only a few aspects will change due to the double or single-income status of your family.

• Increase Your Mediclaim Insurance Cover – Immediately after marriage, you should aim to include your spouse into the same Mediclaim plan. Even, if your spouse is working and has a separate insurance cover, it’s better to go for a family floater cover.

  It will make it easier for you to insure your child in future and avail maternity benefits, which are not available under individual plans. Both of you can hold separate family floater plans as well.

• Increase Your Life Cover – In case your spouse is a homemaker and financially dependent on you, you need to ensure that you increase your term life cover to include her living expenses as well. If you had bought the term plan with life milestone increment option, all you need to do is inform the insurer for the eligible increment.

  For example, i-Select+ term plan from Canara HSBC OBC Life increases the term cover amount by 50% upon marriage.

• Increasing Your Emergency Fund – With marriage, your household expenses also increase. Thus, increasing your emergency fund to meet the new budgets is the natural thing to do.

• Connect Your Tax Saving Investments with Goals – Tax saving investments should continue. However, now you should connect them to your long-term financial goals.

  This will include the retirement goal as well. The pension plan investment you started earlier may continue, however, use of life insurance plans like ULIPs can significantly boost your retirement corpus.

  Also, if your spouse is financially dependent on you the Goal protection feature of ULIPs like Invest 4G, can secure her retirement even in your absence.

• Start Other Long-Term Investments – By now your income has perhaps passed the threshold where your savings have to be forced. You may have an additional surplus available each year to allocate after meeting your tax-saving needs.

  You can allocate the surplus funds to wealth-building goals. Using ULIPs even for this money has a significant advantage at maturity as the value will be completely tax-free.

• Short-Term Investments to Continue – Marriage does not mean that your short-term goals will end. It may even increase the number of short-term goals in your life. So, these investments must continue.

3. Above 40, Income More than Rs. 1.5 lakhs a month, 2 Children

Addition of children to the family completes the family’s existence and pavs the way for a stable future. However, it does need significant investment and planning. So, in this stage, the major part of your investment effort goes into saving for children’s future.

• Increasing Your Term Life Cover & Emergency Funds – Childbirth is another significant milestone in life where you need to revisit your life cover. Enhance the cover to include the child’s future goals and expenses.

  Similarly, increase the emergency funds to meet the child’s expenses as well.

• Investing in Child Plans – Child plans are best suited to meet and safeguard the child’s future goals like marriage and education. Child plans have the goal protection feature which ensures that the plan continues until maturity even after your untimely demise.

  The insurer will deposit all the due premiums into the policy on your behalf. Thus, the family receives a lump sum upon death and the child will receive the amount you intended at maturity.

By the end of this age, you should also give a thought to generating income after retirement. You can start investing in deferred annuity plans by the age of 50, to start a pension income by the age of 60. Although, if you want you can start your pension from the age of 55 itself.