Nov 2022
3 mins read

4 Types of Insurance You Should Have in Your 40s

Life begins in the 40s, they say! From a financial perspective, however, the real business of life begins right on the day one becomes financially independent. To make sure your 40s and beyond become the best years of your life, it’s best to start holistically planning your finances as early as possible. An integral part of financial planning is to have the right types of insurance plans. Here are the four most important insurance policies that should be in place in your 40s:

Life cover

Life above all else; and in investment terms, life coverage before everything else! Hedging your life risk is extremely important, especially if you have family and loved ones dependent on your income. Assessing your life cover should be meticulously planned to include your financial milestones. Here is a handy calculation to assess your ideal life cover based on how life insurance works in India:

Ideal Life Insurance coverage = Annual Income X 20 (Years left to retirement) according to the Income replacement method¹
point 1

Health cover

If your employer offers health coverage for yourself and your family, then you may only need to assess if it is sufficient as per your needs. However, in case you and your family are not covered, then look through the many options to buy health insurance online. It is prudent to include all your family members by taking a floater health insurance for family. Use this calculation to decide how much cover you need:

Ideal Health Insurance coverage² = 50% of Annual Income + Last 3 years’ Hospitalisation Cost.

point 2

Comprehensive motor insurance cover

Owning a vehicle is one of the first priorities when one becomes financially independent. Ideally, in your 40s, you should protect your car or bike with comprehensive insurance to cover damage to one’s own vehicle and also opt for riders for enhanced benefits; it’s always a better choice instead of just opting for the mandatory third party insurance plans.
point 3

Cover your liabilities

If you have liabilities, especially ones where the financial outlay is substantial and the term is long, like in the case of a home loan, you should ensure that you have adequate cover for them. 
For example, most home loans can be taken along with a term cover, where the sum insured is aligned to the outstanding amount of the loan. It diminishes as the loan amount reduces on repayment. 
Another option is to avail of life cover inclusive of your large outstanding liabilities. We have already covered why life insurance is required, so bundling it with large liabilities makes sound sense.
point 4

The core philosophy of insurance is to reduce financial stress and provide mental peace to the policyholder and their family. What better way to put away your worries and start enjoying your 40s. 

1. https://www.livemint.com/money/personal-finance/dont-go-by-thumb-rules-while-determining-term-insurance-cover-11619252046087.html
2. https://www.moneycontrol.com/news/business/personal-finance/-1614907.html

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