You only need to buy life insurance if you have people who depend on you for financial support. These are dependents who, if you were to die unexpectedly, will lose their source of financial support and run the risk of suffering a major fall in their living standards. That’s why life insurance is there to give them a cash lump sum in such circumstances so that they can continue to support themselves in your absence.

Typical examples of those who depend on you financially are as follows:

• your non-working spouse
• your non-adult children
• your elderly parents who depend on the cash allowance you give to them
• your younger brother or sister who depend on you to pay for their education

Another way to look at this is to look at your life-stage and see who might typically depend on you for financial support.

1. Early career, single

   You are early in your career, single, and your parents are still working. Your parents do not get an allowance from you, in fact, you are looking to them to help you with your first down payment on an apartment.

   You do not need life insurance as you have no financial dependents. But use this time to invest as much as possible. Do not buy an investment-linked life policy (as you do not need the life insurance part), best to put all your excess savings into direct investments like unit trusts or robo-advisers.

2. Just married, both you and your spouse are working, your first property

   In this scenario, though your spouse might be financially independent, it will be difficult for her to service the housing loan on her own. In this case, you need life insurance so that your spouse can use the lump sum proceeds in the event of your death to pay off the housing loan.

   Banks sometimes offer you life insurance in the form of a MRTA (mortgage reducing term assurance) as part of their housing loan package. This pays off your housing loan if the borrower should die. If you have this, you do not need a separate life insurance unless your spouse needs an extra cash lump sum to support herself in your absence.

3. Just starting a family, your spouse is taking time off work to raise young children

   This life stage is the most financially challenging as you are the sole breadwinner to your whole family, at least until your spouse returns to the workforce. Should anything happen to you, your spouse would have to return to the workforce immediately whilst raising your children on her own.

   This is when life insurance is most needed. Get maximum cover (e.g. RM1 million) for a maximum term period (e.g. 25-30 years) so that your spouse has a large financial cushion to support herself and your children, including paying for your children’s future education, should anything happen to you.

4. You have teenage children, preparing for their further education

   You will still need life insurance on your own life as your teenage children will need financial support for their upper secondary or university education if suddenly you are no longer around. But the period or term of the life insurance should tally with the age you expect your teenage children to be financially independent, e.g. if they’re 15, and you expect them to be working and independent by the time they’re 25, you need only buy a 10 year term life policy.

   Hopefully, you have already put aside some money to invest for their education, not in expensive investment-linked insurance policies (as your children do not need any insurance other than medical insurance), but in direct investments like unit trusts or robo-advisers that should now be coming to fruition.

5. Your children are now working adults, but your parents are aging

   Your children are now adults and are financially independent. But your parents are aging and depend on you for financial support. Your spouse might also be thinking of retiring from work.

   So long as there is someone depending on you for financial support, like your aging parents or a non-working spouse, you will need life insurance so that they have a sum to support themselves should you unexpectedly die. Make sure your life insurance cover is for an amount that your dependents can live on for the rest of their lives.

6. Your silver/golden years

   You and your spouse are now retired, and though you have a nest egg in terms of savings, you do depend on the financial support of one or more of your adult children to experience a worry-free retirement.

   You should persuade your adult child on whom you depend for financial support to take out life insurance on their life, so should anything happen to them, you and your spouse have a cash lump sum to support yourselves in your golden years. Yes, the roles between you and your adult child have reversed, but the principle of life insurance remains the same.

Do you have any other life stage scenarios that you would like me to cover? Let me know at hello@fi.life.

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Yours truly,
Harvin Sidhu

Editor’s Note: Fi Life offers term life insurance for up to RM1 million and 30 years of cover. Please visit https://fi.life/customer for an instant quote.