The concept of a traditional Indian family is fast changing. With quality education even women are now bread winners in a family. Both spouses working to ensure that household expenses are met and luxuries in life are affordable, have become a common norm.
It might seem these dual income families have a lot more disposable income. However the expenses sort of catch up with their income. For e.g. employing full time maid, business clothing, travelling expenses, take-away meals, dine-out, childcare and the list is endless.
It may look like dual income households have a solid investment to rely on. Unfortunately this is not the case, since most of the income is spent on important and sundry expenses. The only strategy that can rescue dual incomes homes to ensure that they have a good enough income to fallback on when retired is saving through insurance plans.
A good insurance policy e.g. life insurance policy taken by both working spouses, will ensure that upon death of a spouse the other gets the insurance benefit. Although life insurance polices are necessary for single income homes, a dual income home needs to evaluate the type of insurance they need. Investing in a life insurance policy will also ensure that the children are well looked after financially incase both parents meet with an unfortunate death, or permanent disability. With a life insurance policy you could settle existing debts such as home loans, car loans, education loans, etc.
Lets take a closer look at why dual income homes need to invest in life insurance policy.
The past few years have been akin to an unstable job market. It could be anytime or for any reason a spouse may loose their job. Taking care of finances in such circumstances is important to maintain a healthy lifestyle balance. With an investment in insurance policy, you could have enough of corpus to take care of you and your family in such dire situations.
Death of a Spouse
Life is uncertain, you never know when death could strike you or your spouse. In such unfortunate incidents, you need a good contingency to take care of your family. In situations when either of the working spouse in a dual income family dies, term plan acts as a saviour. It is advisable that both working spouses invest in a term plan for themselves. With individual plans, the claim of the deceased spouse can help the one living and the rest of the family. Incase both spouses meet an unfortunate death, the claim settlement from both their plans can be utilised by their nominees/children.
Critical Illness or Disability –
Dual income is a blessing as long as both spouses are healthy and working. There could, however, be instances when one of the spouse could suffer from permanent/temporary disability due to an accident or critical illness. In such cases, it steps down to a single income home, where most of the financial burden, hospital expenses as well as looking after your spouse who is ill/disabled can be a burden. An insurance policy with a critical illness riders, personal accident riders etc can come to your rescue. A health insurance policy can help ease most of the financial burden.
Insurance polices are exempt from tax, as U/s 80C of the Income Tax Act. According to the Act, Rs. 150,000 is exempted from taxation, and this applies to individuals in a dual income home. Hence, dual income spouses should invest in insurance policies individually as it helps them save on tax. Tax saving should not be the only reason why dual income homes should buy insurance policies. Investment linked insurance plans can help you save on an additional Rs. 50,000, which helps save a lot when it comes to tax deduction.
Debt Settlement –
Insurance plans as we all know are great if you want to settle a debt especially after the death of a working spouse in a dual income home. With the sum assured you can easily pay of existing loans like car loans, home loans and other miscellaneous loans that could be a financial nag. Settling these debts will help the existing spouse or dependents live a debt free life. Once these debts are paid off, you can start creating a sizeable corpus for you and your children, plus it will help you lead a lifestyle without any compromise. A ULIP plan and a mortgage redemption will help settle most of your liabilities.
Investing in insurance a decade ago was not a priority. However, with changing lifestyles, different illnesses and increase in inflation, saving for the future has become important. With a good insurance policy achieving most of your goals, living a health life as well as taking care of dependents after your gone is now possible. In dual income homes, investing in individual insurance policies are even important as it helps balance the spending, takes care of savings and creates a corpus for all your rainy days.
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