A financial plan is a must for every individual with or without responsibilities. The financial planning puts your short and long-term objectives in order and paves a way to fulfil them. However, there is another important part of the financial plan which aims to protect the financial interests of your goals and dependents.
This financial protection plan is also called a contingency plan and provides a roadmap for you in case of emergencies. Health, term life insurance and other insurance are part of this financial plan.
Executing Your Financial Plan
A plan without implementation is merely wishful thinking. The milestones you set for yourself and family define how your life should be. Few of these milestones are so important that they are even more important than your life.
Thus, achieving such important goals cannot be left to less than perfect execution of your plan. The steps of executing different transactions in your financial plan should be in the following manner:
1. Contingency Plan
- Buy term life insurance cover
- Secure health and Mediclaim insurance
- Build an emergency fund
2. Start saving for retirement
3. Invest in your children’s future – higher education & marriage
4. Invest in wealth goal
5. Save to repay expensive loans
6. Invest in mid-term goals – home buying, renovation, vehicle, vacation, etc.
Why Contingency Plan First?
Imagine planning a long road trip with family or friends. You have decided the destination, date of journey, places to visit and return. Should you just take your car out, but everyone in with the baggage and starts driving?
Ideally, you would check if the car is ready for the kind of journey you wish to undertake. You’d check for tire pressure, kilometres to next service and even the paperwork before declaring the car fit for the long journey.
Life is not very different from a long road trip. You will face many different patches, some comfortable, some rough, there will be turns and twists and you will meet a lot of people. You will also make a lot of money during your journey and spend a lot of it too.
However, in life the journey is one-directional, after you, the next generation must continue driving forward. Contingency plan helps you achieve this certainty even in most difficult unforeseen situations.
Why Term Life Insurance First?
Although, as you read through this article, it may seem impossible. However, there is more than one reason for putting your limited resources towards a life cover first:
- Your dependents stand to lose their only source of financial support in your absence
- Money needed to sustain the family and help meet their goals is substantially large
- Cost of hospitalization is lower and you can bear with savings and loans. So, if you must choose between life and health, life comes first.
- The job loss would be temporary and you can still manage with your savings and recover later. However, loss of life is not recoverable.
Make Your Term Insurance More than Life Cover
Since term insurance is the first step after your financial plan, why not make it more than just a life cover? There are two ways you can turn your term insurance cover into an ultimate risk manager for your family:
- Add more benefits to the base plan
- Select features and plan benefits to make the plan work like a swiss knife of financial tool
Adding More Benefits to Your Base Plan
You can include more benefits with your term life insurance plan. These additional benefits will help you cover other natural risks like health, accident and disability. These risks may not always end up in the loss of life but are financially taxing nonetheless.
So, don’t forget to add the following benefits to your base term plan for a nominal increase in premium:
- Accidental death and disability cover
- Premium waiver benefit at least in the case of disability
- Critical health insurance for life-threatening diseases like cancer, heart failure, etc.
Building a Flexible Term Plan
Apart from the additional covers, you can choose many features in the best online term plans which will turn it into a well-rounded financial solution. For example, consider the following problems with your current term plan setup:
- After you, your spouse will be the primary caretaker of the family. But if she’s a homemaker she cannot secure a term cover
- You may have a family floater Mediclaim insurance for your homemaker spouse. However, she’s also prone to unpredictable life-threatening diseases.
- Your dependents may not have managed a large amount of money. Term insurance will suddenly add a crore rupees to their account. How comfortably can they use this money for their future needs and goals?
Here are few ways iSelect Star term plan from Canara HSBC OBC Life provides solutions for these problems:
- Critical health cover is inbuilt with the term cover without any additional premium. So, the moment you buy term cover you automatically have a term cover as well.
- You can add your homemaker spouse to your term cover and have a joint life cover. After your demise, the cover for your spouse continues without any extra charge. Thus, she’ll also have a life and critical health cover.
- You can divide your term life cover benefit amount payable upon the claim, into two parts:
Lump-sum payment: for taking care of immediate liabilities, and investing for future life goals
Regular monthly income: for taking care of regular expenses and lifestyle. You can choose to increase this income every year to account for inflation.
With these benefits and features adding your term insurance first after completing your financial plan resolves multiple challenges. With these advantages, your term life cover is not just a life cover but an important part of your contingency plan.