Personal Finance: Go For Insurance
This requires disciplined savings that are not dipped into for impulsive purchases. The primary differentiator between various forms of savings/investment schemes and life insurance is the structure of the product and the features associated with them
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I often recall a cartoon by R.K. Laxman that read: “I make all the big decisions on how the fiscal policy should be and who should form the government, while my wife makes all the decisions on the household budget, where the children should study…” This embodies the stereotype that women have been subjected to for ages. By default, they are the care-givers, a mother, a wife, a sister, while a man is always believed to be the breadwinner and head of the household.
But times, they are a changing. Women today are focused on building a career and are taking active part in meeting financial obligations. However, it is an uphill task to eradicate the stereotypical image of women completely. Even today, women find themselves without a soul to bank on, if their spouse meets an untimely death. It is highly recommended for women to insist on creating the financial protection through insurance. This demand to replace the potential earnings is not just important, but mandatory.
Whether it is to safeguard their family financially, in case of a mishap, or to ensure quality education for kids, insurance can be a vital tool to combat such exigencies. Life insurance — that many believe to be an expenditure rather than an investment — can provide the necessary funds needed to pay off loans, taxes and all other debts, in case of unforeseen circumstances.
Traditionally, it is the man of the household who makes these decisions, even when the other half is sufficiently independent. It’s about time that women also took a lead in matters related to finances. Traditionally, women are known to accumulate jewellery for a child’s wedding/education, recycling gifts, putting away the left-overs of monthly budgets, and so on. However, these cannot replace the entire expected earnings of a breadwinner. And it definitely cannot match the quantum of funds that insurance can offer, covering for uncertain risks of death or critical illness. Irrespective of their earning status, it is important for women to have a pure term plan insurance, as a first step towards financial responsibility. The amount of cover or sum insured should be equal to the amount of income an individual is expected to earn over a lifetime. For instance, 40-year-olds should have insurance cover equal to 15 times their annual salary. But let’s not be so morose. Life is not just about living to die one day, it is about enjoying the advantages of having money for your major milestones.
This requires disciplined savings that are not dipped into for impulsive purchases. The primary differentiator between various forms of savings/investment schemes and life insurance is the structure of the product and the features associated with them.
Key aspects to remember:
• Life insurance is also offered as savings/investments.
• These come under various options of market linked and/or guarantees.
• Life insurance plans are for the long term and have a lock-in period of a minimum of five years, making them suitable for long-term needs. Impact and utility of this feature: •When putting aside money for long-term goals, a life insurance policy will help you save for the long term with a definite amount in return.
• Traditionally, parents expect their children to take care of them in their old age. But in this inflationary world, expecting financial support can be taxing for them. Money from insurance can create a fund pool for the long term. It can be withdrawn in a structured manner as a pension, or can be used to buy annuity. Women also need to ensure that future finance inflow is ensured. Insurance plays a big part to support this endeavour
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