How to Secure Family Income After Death?

Apart from your savings and investments, there is no better protection than term insurance. Term insurance is one of the family financial protection instruments which have always played a major role in helping families cope with financial uncertainties.

The Importance of Securing Family Income

For most families, income is the financial base that they can rely on to enable them to be accustomed to each day and at the same time plan for the future as well as take care of the unexpected. The absence of the first earner results in the loss of the main source of income, which in turn can lead to significant disruptions in the family, not only in the short term but also in the long term.

When you secure your family income, your family members are guaranteed:

• That their basic needs, food, clothing, and shelter, will be met

• The realisation of the family's dreams and plans like getting a degree, and owning a house

• That no drastic change will be made in their lifestyle

• That financial worries will be minimised, thus giving them the space to deal with the shock

Financial preparedness helps a family that has gone through a traumatic experience to concentrate on recovery and let go of the worries related to money. A term insurance plan helps in continuing the standard of living for the family in case the primary earner’s income is not available like before. 

Financial Challenges Families Often Face After a Demise

The loss of a breadwinner causes various issues which, if not foreseen, may turn out to be quite serious very quickly.

Loss of Regular Income

Expenses for the home such as food, utilities, rent, and school fees will always be there whether the time is good or bad. Families will find it very difficult to meet these basic needs if there is no source of income.

Outstanding Liabilities

After a person dies, home loans, vehicle loans, and personal credit cards are just a few types of loans that continue. Their family members might have to take over the loan payments.

Future Financial Commitments

Children’s education, healthcare, and other major life events are always going to need money. Without a proper financial plan, this money might be at risk.

Depletion of Savings

If there is no proper financial protection in place then the family will have to use their savings a lot, which can go down fast and also affect the long-term security.

How Term Insurance Secures Family Income After Death?

There are many term insurance benefits that help a family in uncertain times. Here are some of them with which the family can maintain their living standard:

Income replacement

The payouts from Income replacement term plans offer a lump sum, a regular monthly income, or a combination of both. This allows families to carry on with their daily expenses and stay financially disciplined.

Debt management

Part of the settlement can be utilized to clear the outstanding debts, thereby preventing the family members from being burdened with debt obligations.

Education and long-term goals

If the coverage is sufficient, the children’s education plans and other future goals can be carried on without any challenges.

Financial stability and independence

Term insurance is a way for families to utilize the payout amount wisely by investing it in such a way that it produces a steady income and ensures their financial stability over the long run.

Let us understand this with the help of an example, 

Take Mr. Rajesh for example, he is a 35-year-old professional who has an annual income of 12 lakh, lives with his wife and has two kids. One of his financial obligations is a housing loan and he worries about his family managing financially in his absence.

Rajesh opts for a Rs. 1 crore term insurance for 25 years. However, if Rajesh passes away during the policy term, the insurance company will pay Rs. 1 crore to his family.

Let us see how the family can utilize that money,

• Day-to-day and Initial Expenses: The family can keep on fulfilling their basic needs without using their savings.

• Immediate Expenses and Lifestyle Maintenance: The family can continue spending on their daily necessities without touching their savings.

• Debt Repayment: The house loan and any other debts are paid off, thus the wife is relieved from financial worries.

• Children's Education: Proper budgeting of funds is done so that the education of the children is not affected.

• Future Security: The leftover amount is used for investing in avenues that provide regular income and thus the family is able to maintain their lifestyle in the long run.

Advantages of Term Insurance for Comprehensive Family and Income Protection

Term insurance for family stands out as a practical solution for several reasons:

Affordability

Term insurance is the most affordable life insurance policy. They provide huge amounts of coverage for relatively low cost premiums thereby making them available to people of all income brackets.

High Coverage Options

One can choose a sum assured that corresponds to one's income, liabilities and future goals.

Flexible Payout Structures

Concept of modern term insurance policy encouraging the flexibility in the mode of benefits payment thereby helping families effectively manage their finances over time.

Transparency and Simplicity

Term insurance has no investment, linked features, therefore it is very simple and easy to understand and manage.

How to Choose a Term Insurance Plan?

One needs to look at different aspects very carefully to select the most suitable term insurance plan, such as:

• Establish the correct amount of coverage: Take into account present income, debts, upcoming expenses, and the effect of inflation. Use a term insurance calculator to know how much coverage you would need. 

• Choose a policy term that suits you: The insurance period should be decided on the basis of the time for which one will have maximum financial commitments.

• Select a suitable payment method: In case of families that need to regularly have cash on hand, monthly payments may be more beneficial.

• Check the extra features: Accident death benefit is one of the rider options that can complement the basic cover.

• Keep the nominee details updated: Having proper nominee details in place is very important for smooth claim processing.

Proper planning at this point will guarantee that the insurance policy will be a perfect fit for the needs of the insured.

Summing Up

Term insurance plan is a dependable financial instrument that can be used as an income replacement tool if the main breadwinner is no longer alive. The payout can support the family for a number of years, and make them financially stress-free. It is a promise the family will be financially taken care of, future interruptions will not be caused by the loss and the family will be able to go on with their life without fear, even at uncertain times.