Financial requirements of a person are subjective and continually change throughout his or her life. Everyone has their own basic financial life cycle but the person might experience some unexpected events which are completely unplanned in this financial pattern.
Financial vulnerabilities would result from the breadwinner’s demise or the end of an income flow. In India, very few plans to address this risk and match it at all times. People should know first what financial vulnerability is.
It is the household’s living standard volatility leading from the death of a wage-earning household member and the possibility of outliving one’s savings in retirement. Both of these scenarios are very real and can be solved with some disciplines and proactive decisions.
During ancient days, support of family was seen as the best solution for financial vulnerability. But, financial protection plans are now in demand because of increasing acceptance of nuclear family. In fact, the majority of people are not completely aware of the new investment plans and are still happy with safe bank deposits.
Life insurance comes to the rescue to solve financial risk related to longevity and death. The way term insurance plans are made, they can take care of the family in the eventuality of the breadwinners and by saving for life in retirement when the flow of earning stops.
In case of breadwinner’s demise, life insurance policy can give money to his dependents as a substitute for breadwinner’s income to meet necessary expenses. Just like retirement plans facilitate people to save for their long-term requirements through forced thrift which a retirement plan instills.
The long-term nature of this plan works in favor of policyholders. It is the combination of long-term investing, regular savings and compounding benefit which makes life insurance the most suited financial tool to address the financial vulnerability.
You only need to evaluate the risk period and then manage it accordingly to have enough insurance. Term insurance not only offers you financial cushion but peace of mind as well.
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