Insurance tips for various life stages

ADMIT it. You often cringe at the thought of having a conversation about ‘life insurance’.

While it may seem confusing or even daunting at first, seeking the help of a trusted advisor can set you well on your way to actualising living benefits that could help finance life goals like purchasing a home, educational costs for your children, and providing peace of mind in case of critical illness.

We sought help from an industry insider to get some age-specific tips to help demystify what should be a critical part of planning for anyone with financial dependents.

20s – Starters & builders

Kerry-Ann Chong, director, sales and service at Scotia Jamaica Life Insurance Company, says ideally, this is the time when people should start thinking about a policy while they also consider their medium- to long-term goals for their life.

A universal life insurance plan — which is one that has a redeemable cash value that people can access during the life of the policy and has the ability to provide higher investment returns over time — should be acquired in your twenties. According to Chong, this will enable you to save for those goals while protecting what’s important to you.

A key pointer from the insurance guru is that for people hoping to snag cheaper insurance, the general rule of thumb for protection is to get it when you are young and in good health.

She also recommends having critical illness protection, “which will ensure you are covered in the event of an unfortunate diagnosis”.

While many 20 year olds may not be considering retirement just yet, Chong says this is actually also a good time to begin participating in a pension plan or acquiring an individual retirement account like ScotiaBridge — which enables individuals, especially those who are self-employed, to make tax-deductible contributions throughout their career, and have those contributions invested in a trust that will they can access at retirement.

Several employers offer a pension plan to their employees, so people should also take time out to understand the offerings and when eligible, begin to increase pension contributions over time.

“Start it with your first paycheque or first income received and gradually increase your contributions so that you will be able to capitalise on the tax-free earnings during the accumulation period of the plan. This approach will reduce your anxiety levels later on as you consider life post-retirement,” she further recommends.

30s-40s – Establishers & accumulators

As we get older, our insurance needs will become different. For example, your financial responsibilities will undoubtedly increase if you get married and expand your family with children. This is the age when people should start thinking, “what if something happens to me?” and especially with a family, parents should have enough insurance to ensure that they are able to replace the income of either of the bread-winners.

“Another rule as it relates to insurance coverage, is to aim for 10 times your annual salary or income,” Chong recommends.

Individuals may also want to consider coverage for other dependents such as ageing parents in the event of a critical illness like cancer or a stroke or even the death of a loved one that could place significant burden on your resources.

50s-60s – Preservers

At this stage of life, the insurance guru says it becomes vital that you have enough insurance coverage to begin planning for your retirement and the maintenance of your standard of living outside of a normal income pattern.

If you planned ‘right’, Chong says, you may even be able to include some of the luxuries of life or even pursue that niggling passion project with all that free-time that you will have.

“Upon retirement, you can then purchase an annuity that will ensure you have a steady income during retirement, allowing you to comfortably afford your living expenses,” she added.

While at 50 you still have “a lot of life left”, this is also the time to ensure your family will be protected in the event of your untimely passing.

Sufficient insurance is important in ensuring full coverage of your debts such as your mortgage and other assets which your beneficiaries will depend on. This can also help to protect your business in the event a key person gets critically ill or passes away.

“No matter your age or circumstances, insurance planning plays a vital role in ensuring you protect who and what you value most in this world and should not be taken lightly,” Chong said.