LoanRaja Blog- Personal Finance Guide

Our financial needs change throughout our life. As the life style changes needs too undergo transformation. In accordance with the changing financial needs life insurance needs also change. The life insurance requirements of an unmarried 25-year-old will be entirely different from that of a married man with children. A 60-year-old’s insurance needs will be totally different. A plethora of life insurance policies are available now to suit the needs of different age groups. Lifecycle based portfolio strategy takes into consideration the dynamics of different life stages of an individual. Its investment approach changes with each life stage.

Such a policy provides you with an option of lifecycle-based portfolio strategy that continuously re-distributes your money across various asset classes. This will be done based on your age, and helps you achieve the right asset allocation to meet your desired financial goals. In the beginning, your investments will be distributed normally between two funds. As you move from one age band to other, the fund will redistribute your investments. This will take into account the ability to take risk at different ages. Earlier years will see more allocation for equity and less for debt. In later years the trend will reverse.

Before marriage

In the case of a young man of 25 who has just started earning, the thought of investment may be the last thing to figure in his mind. He may be single and getting support from the family. He is ambitious and focused on his career. Mostly he likes to spend. Perhaps he is thinking of going for higher studies. At that stage of life what kind of life insurance suits him best? His life insurance needs are almost negligible. The main objective for insurance should be to promote a habit of saving. For this the best option is to buy an equity linked insurance scheme which doubles as an investment tool. He can also try a shorter-term endowment assurance policy.

After marriage

After marriage one’s lifestyle gets reoriented and financial needs undergo a sea change. Young couples dream big. A better car, owning their own home, a foreign holiday…. the list is endless. It is also the time to think about your added responsibilities. You now have a partner; you may be buying a house and perhaps planning for a family. It is time for you to start focusing on your family and yourself. At this stage what can be the insurance solution? You can opt for a home protection plan to take care of your home loan if the inevitable happens. A personal injury insurance plan to provide for the medical needs will be an added advantage.

The birth of a child ushers in far more changes in a couple’s life. Along with the joy the newborn brings on new responsibilities. This is the time a family will seriously plan for the future. What kind of protection plans will serve your needs at this stage of your life? Parents would like to provide the best for their children. They deserve a secure future and a whole lot more. You also need to adequately protect your assets, so that your family is provided for even if something unfortunate should happen to you. A home loan protection plan will ensure that your family is not burdened by the home loan even if you are not around.

It is also important that you plan in advance to meet your child’s future financial needs. Insurance firms offer several child-related investment avenues for parents wherein the money is invested in endowment plans and in unit linked plans. Planning financial resources for your child at various life stages like education, marriage etc. are fulfilled by Money Back Child Insurance Plans. Parents can also invest in unit-linked Children Insurance Plans where there are better returns. This has more flexibility in terms of switching one’s money from equity to debt and also can withdraw money several times in a year.

After retirement

At the other end is the 60-year-old retired man. He has no regular jobs or steady income. His children are financially independent. He has no financial liabilities. He needs regular income to lead a decent life. Moreover, he will need sufficient cash balance for any emergency medical expenditure for him and spouse. At this age he has to manage with his savings and investments. He is not in a position to take risks. His basic concern will be the protection for his investment and also protection for his spouse. Such a senior citizen can select single premium immediate annuities or long-term care products or a retirement plan, which protects capital and gives steady income.