Even if you have a large inheritance and perhaps do not need to earn money actively, you still need good financial decisions to protect your wealth. Not only this, but you have many compelling reasons to consider life insurance, regardless of your financial status:
1. Covering the cost of death, disability or terminal illness2. Buffering the period of transition for the family after the death of the primary breadwinner3. Preserving the family’s financial fortune4. Passing on the legacy to the next generation
You save money primarily for financial and medical emergencies, ensure a bright future for the child, meet larger financial goals, have a comfortable retirement, and to leave a legacy/inheritance for the next generation.
However, it is unlikely that you can prepare adequately for all of these things with just your first paycheque. Emergencies are not predictable and can even cause trouble for the wealthiest of the lot. So does retirement if you are not careful.
Cost of Death
The death of a family member causes tremendous trauma and emotional loss to the surviving family members. The emotional scars are irreparable, irreversible and very deep. To add to the woes, if the departed soul was the sole/major breadwinner of the family, the household could plunge into a financial crisis
Unpaid rents, school fees, lifestyle costs and even basic household maintenance will become a challenge. Look at Karthik’s case below.
Karthik, aged 37 years, died of massive cardiac arrest, caused by tremendous stress at work. He has left behind his wife, 2 children aged 7 years and 4 years. He was earning an annual income of Rs. 10 lakhs and had accumulated savings of Rs. 25 lakhs.
His demise has left a vacuum in their hearts as well in the bank account. The family is perplexed. How will they manage and for how long? The cost of death is huge.
Cost of Death = Loss of Income + Opportunity Cost
… because children will lose opportunities to get quality education and build strong careers.
The loss of income will degrade the quality of life as Karthik’s wife will not be able to sustain the lifestyle with meagre savings.
Before Karthik’s demise, she was planning to attend a skill development program that could help her start a career. The plan was to build a parallel income source in future when the kids would grow up. But all these plans have now shattered, and survival has become a priority. She sometimes wishes, ‘what if Karthik had invested some money in life insurance?’
Accidental Injuries and Death
Accidents and terminal illnesses are another expensive set of emergencies. Inflation in healthcare costs is higher than average and private healthcare in India is already exorbitantly expensive.
The cost of death from an accident or a terminal illness is usually much higher than in other circumstances. Thus, the family should have additional financial support for such emergencies.
What Will Your Family Need After You?
Every family has the following financial needs. While you will fulfil these and more during your lifetime, it is important that even in your demise these are looked after:
a) Regular income for household and lifestyle maintenanceb) Amount to pay off ongoing debtsc) Amount to meet important future expenses, i.e., child’s higher education and marriage
Providing Adequate Protection to the Family with a Life Insurance Plan
The wealth you have carefully built or have inherited, should not be eroded in case of an unfortunate natural event like death. The purpose of life insurance is to help your family maintain their financial fortune until they can come of age and start making bigger financial decisions.
Yes, you do need life insurance because that is also a type of saving, albeit a smart one. A term life insurance cover can provide adequate financial protection to your family in case of terminal emergencies. This goes straight to your spouse and children to support their living costs and important financial goals.
The best life insurance plans provide every feature to help your family receive adequate financial support when they need it. For instance, life insurance plans from Canara HSBC Oriental Bank of Commerce Life Insurance offer the following:
1. Regular income pay-out from term insurance claims along with a lump sum pay out
2. Regular income pay-out can be increasing to adjust for inflation
3. Premium protection option for saving plans, so that your child has the money you planned even after your early demise. (The insurer pays the remaining premiums in the case of your death.)
4. Chance to increase your term life cover after key life events like marriage, childbirth and home purchase.
Who Needs a Life Insurance Plan?
If you can relate to Karthik, you need life insurance. Insurance should be purchased when you do not need it because you may not get one when you need it the most. If you are young and just started working, this is the right time to sign up for an insurance policy. Premiums increase with age and your future family certainly needs financial cover. If you have dependent parents at home, it is another compelling reason to have an insurance policy in your kitty.
If you are already in your 40’s, insurance could be expensive but still worth the investment. A Rs. 1 Crore Sum Assured policy for a 40-year-old will cost approximately Rs. 18,000 to Rs. 24,000 per annum depending on the tenure chosen.
Is there anyone who does not need life insurance? Practically no one.
Additional Benefits of Buying the Best Life Insurance Plan
The iSelect Star Term Plan offered by Canara HSBC Oriental Bank of Commerce Life Insurance offers to add on riders such as Accidental Total and Permanent Disability Benefit and Accidental Death Benefit along with the policy. The key advantage is that the Sum Assured is immediately paid out and future premiums are waived off. The other features and benefits continue till the end of the term. This helps the person manage the expenses incurred because of loss of income due to the accident and continues to offer life cover thus giving further assurance to the family.
The Child Support Benefit (CSB) is a unique feature of iSelect Star Term Plan that gives a fixed amount in case you are diagnosed with a terminal illness. This helps your family manage expenses related to a child’s education at different stages in life. This is an add on feature implying that the other benefits of the policy will continue as usual.