...it does protect dreams. Here's how!
In the aftermath of the disastrous earthquake that hit Nepal, many lives were lost, many injured and properties destroyed.
While it will take many years to erase memories of such tragedies, it is a grim reminder that we cannot take financial security of our family for granted.
Disasters like these remind us of the importance of insuring our life and assets, as they leave behind a huge financial burden on our survivors.
Being adequately insured ensures that our dependents are provided with the much-needed funds to be financially independent without having to compromise on their standard of living.
Hence a term life insurance policy is what is needed to financially secure a family when the breadwinner passes away, especially when the death is untimely.
Today, at a time when inflation is increasing, and with the growing tendency to shift to nuclear families and a change in lifestyle, insuring your life should be top priority.
Once the decision to buy is made, next step would be to calculate your economic value.
Though human life as such cannot be valued, it is possible to arrive at a quantified figure for the purpose of planning your insurance by evaluating possible loss of future income in case of eventuality.
This should account for the shortfall in income for the people you leave behind.
For this you may have to estimate how much funds your survivors need to maintain their standard of living at the same time considering they do not have to bear your living costs.
For instance if you are 40 years old today, there is another 20 years of professional career ahead of you.
The amount your life insurance product pays in case of eventuality should represent present value of the income that you would earn in these 20 years. You should also factor in uncovered medical bills, outstanding debts etc. that your surviving family members will need to bear.
But this does not mean that only those who are earning need to insure their lives.
Suppose you are a housewife with no source of income, you still make an economic contribution to the family. You take care of the children, drop them off to school, cook food, clean etc. whose replacement economic value is quite high. With a suitable life insurance, you can make it easier for your family to cope up with these expenses in case of any eventuality.
Also most single people think they do not need life insurance as they do not have any dependents. But they may be supporting their aging parents, or their parents would be counting upon them to take care of their future expenses.
Moreover, the best time to buy insurance is when you are young and healthy as you will be rewarded with attractive rates. Single single people should not hesitate to buy a term insurance plan.
What if you have grown up children who do not depend on you financially, would you still need insurance? The answer is a resounding yes! You may have to think about your spouse. Your financial plan should help your spouse to not only meet financial expenses but also the lifestyle.
It is natural for most us to compromise on the protection element while focussing on the ‘wealth creation’ aspect of financial planning.
We should all realise that what we are really buying through life insurance is peace of mind and a good night’s sleep.
Wealth creation aspect is also important to meet your life stage goals and we should remember that life insurance is the most efficient wealth creation tool. Life insurance plans help create a corpus for life stage goals like children, education, marriage, retirement etc.
It is time to first protect the dreams of your loved ones against unforeseen situation through a protection cover and then build the habit of disciplined savings for a bright future for your family.
Photographs: Annais Ferreira/Creative Commons
V Viswanand is Sr Director and COO, Max Life Insurance
