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Why Adequate Life Insurance Is Essential for Long-Term Financial Security

Yatin Gupta aims to maximise financial benefits while opting for life insurance coverage that extends up to the age of 80. However, the real question lies not in the duration alone, but in understanding the true purpose of life insurance—financial protection for dependents in one’s absence.

The key consideration is whether anyone would be financially dependent on him at the age of 80. In most cases, the answer is no. By that stage of life, major financial responsibilities such as children’s education, marriage, and home ownership are typically completed, and retirement planning is already in place. With sufficient assets and savings, financial dependence usually reduces significantly.

The effectiveness of Yatin’s term insurance largely depends on when he expects to achieve his financial goals. If he can accomplish his major milestones within the next 15 years, his requirement for a large insurance cover may reduce substantially thereafter. However, if these goals take 15 years or longer to materialise, inflation becomes a critical factor that must be accounted for, as rising costs can erode the real value of money over time.

This highlights an important point—longer policy duration alone does not guarantee better protection. Instead, insurance coverage must be aligned with income growth, inflation, and the actual period of financial dependency. Both inflation and longevity can significantly impact retirement adequacy and long-term financial planning.

Ideally, Yatin should prioritise maximising his savings during his working years to build sufficient assets that can support him throughout retirement. His retirement corpus should be structured to generate adequate income while preserving capital, ensuring financial independence well into later life.

At the same time, life insurance coverage should be designed to support his dependents during their financially vulnerable years—not beyond. Insurance must complement wealth creation, not replace it. The objective should be to ensure that, by the time he retires, he is financially self-sufficient and no longer reliant on insurance protection.

In summary, a well-balanced financial plan requires:

• Life insurance coverage aligned with dependency years
• Realistic consideration of inflation and time horizons
• Strong focus on savings and long-term investments
• A clear transition from protection to wealth preservation

A thoughtful approach that integrates insurance, investments, and retirement planning will help ensure both security and stability across all life stages.