Things to keep in mind when buying life insurance policy after 40

Life insurance should be a critical part of one’s financial planning. Life insurance helps safeguard oneself and their family against two types of financial risks – untimely death and old age. The breadwinner’s untimely death places the family at risk for livelihood expenses in the future while the risk of old age is that during retirement years the individual’s income generation 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.

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India has always boasted a younger population, however with every year this “younger population” keeps ageing. To put this into more perspective; India has one of the largest millennial population, estimated at 426 million, and is approximately 34 per cent of the total Indian population and forms approximately 47 per cent of the total work force. This generation has started hitting the age group of 40 and within the next 10 years 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 and so 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 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.

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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, the sum assured availed and 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. The decision 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 the 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 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.

(The writer is the managing director and chief executive of Shriram Life Insurance)