Money may not buy happiness, but it does protect dreams. Here's how!

Though loss of life is emotional setback and cannot be undone, 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.

Oct 09, 2015 10:10 IST Max Life Insurance V Viswanand |

In the aftermath of the disastrous earthquake that hit Nepal, many lives have been lost, many injured and numerous properties destroyed. While it will take many years for us to erase such a horrendous memory, 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 disasters like these leave behind the financial burden for our survivors.
 
Though loss of life is emotional setback and cannot be undone, 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 precisely needed to offer financial security for a family when the breadwinner passes away, especially when the death is untimely.
 
 Today, at a time when there is increasing inflation, changes in lifestyle and growing tendency to shift to nuclear families, insuring your life should be the 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 while considering they do not have to bear your living costs.   
 
For instance if you are 40 years old today, there 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 needs to bear.
 
But this does not mean that, only those who are earning need to insure their lives.
 
 Suppose you are a house wife 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.
 
 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 his parents would be counting upon him to take care of their future expenses.  Moreover, best time to buy insurance is when you are young and healthy as you will be rewarded with attractive rates. Hence Single people who are mostly young should not hesitate in buying 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 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 that what we are really buying through life insurance is peace of mind and 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, own 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.
 
 The author is Sr. Director & COO, Max Life Insurance

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