Life is a journey with different stages, each bringing its own set of challenges and needs. One important aspect to consider at every stage is life protection.
Let’s break down the life cycles and how protection needs change over time:
During childhood, protection needs are usually met by parents or guardians. They ensure that children have the necessary support and safety.
As young adults, you might still rely on your parents for some financial support. If you’re unmarried and without financial dependents, your main protection needs are maintaining an emergency fund and possibly insuring your income against illness. In rare cases, if a relative relies on you, a term policy could be appropriate to prevent financial hardship for them.
When you’re in a relationship and financially interdependent, it’s crucial to have an emergency fund. Additionally, consider protection against death or loss of earnings to ensure financial stability.
Starting a family often means lower incomes and higher protection needs. Expenses such as rent, childcare, and mortgages can limit the money available for life insurance premiums. In such cases, lower-cost term insurance products like Family Income Benefit can meet immediate protection needs at a relatively low cost. Critical illness cover or protection against loss of income should also be a priority.
As your children grow older and become more financially independent, your income might increase, allowing for more disposable income. At this stage, you may need increased protection against death or ill-health to maintain a higher standard of living.
When your children leave home, your focus shifts from protection needs to investing more towards retirement income. With mortgages nearly or fully paid off and children financially independent, disposable income could be at its highest. Protection needs for death and ill-health may still exist but will be lower than in previous life cycles.
In retirement, protection needs change. Life cover to protect a partner or earnings against ill health may no longer be necessary. Instead, protection needs may turn to inheritance tax planning, whole of life cover, and long-term care needs.
These seven life cycles are a general guide, and not everyone fits this mold. With high divorce rates and more people choosing to live alone, new challenges arise, requiring individuals to re-evaluate their financial future and adjust to their new reality.
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