Yes, there is a right time to buy life insurance. Over the years, insurance experts have zeroed in on a simple rule of thumb:
The right time to buy life insurance is when there is a dependency on your income
Adding to this, even though life insurance is a must-have tool in your financial portfolio, it would be wise to go through the following list and understand how the need varies from person to person depending on their age, family situation, and financial dependencies on their income.
Let’s run through a few common examples:
- If you are above 30 with a wife and a young kid(s), you NEED to have life insurance to take care of your wife and kid’s future in both your absence and presence. In such a case, having a term plan and child plan is a must!
(Suggested reading: Are You Prepared to Meet Your Child’s Education Expenses?)
- If you are below 30 and single with a financial loan(s) and parents to take care of, you NEED to have life insurance, so that even in your absence, your loan(s) can be paid off and your parents are supported financially.
- If you are between 25 and 30 and single with no liabilities or dependencies, then you NEED NOT have life insurance, but since you do not have any liabilities, you can think of equity (moderate- to high-risk) investments that will help you build a corpus faster. ULIPs (Unit-linked Insurance Plans) are a good option because they give returns just as high as mutual funds but with many more benefits like lower fund-management charges, tax benefits, and life cover, among others.
- If you are above 50 and coming close to retirement, then you NEED to have life insurance that pays out monthly income during your retirement so that you do not have to be dependent on anyone.
(Suggested reading: How to Plan for Retirement)
It is important to understand that getting covered by life insurance must be a well-thought-out, well-calculated decision, so choose your plan(s) wisely keeping in mind changing life stages.