Financial Safety Net for Dependents

Making sure that the financial needs of your dependents are met in case of an unexpected loss is one of the most important things you can do as a wise investor. A dependent (be it your spouse, children or other relatives) needs the primary earner in the family for food, education, medical care, and payment of debts. A sudden stop in income can lead to big financial problems. Term insurance, in this case, is a first step toward making the family financially secure.

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Who are Financial Dependents?

Financial dependents are those whose living standards are supported by the earnings of another. Apart from spouses, these may be minor or adult children, elderly parents, and any other relatives who would be unable to manage on their own without support. In addition, debts such as mortgages, loans and business obligations add to the financial vulnerability of the family.

Without the provision for a planned financial backup, it is the standard of living that will be most affected, the education of the children may be discontinued and with the increased burden of loans, the family becomes highly susceptible to debt. That is why it is not a matter of choice but of necessity to establish a financial safety net to prevent these risks and/or reduce their impact.

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What is a Term Insurance and How is it Useful?

Term insurance is a type of life insurance product that offers coverage for a definite period, usually 10 to 30 years. If the policyholder dies during the term, the insurer pays a fixed amount to the survivors. Unlike endowment or unit-linked insurance policies, term insurance is solely intended for risk protection and not for savings or investment growth.

The main features of term insurance are:

Cost Effectiveness: Since there are no investment components, the premiums are mainly lower.
Adjustability: One can choose the amount of coverage to meet the financial needs of the dependents.
Transparency: The policies are simple, with clear terms and conditions, thus they are easy to understand and handle.

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Benefits of Term Insurance for Family Protection

Apart from shielding your family members from the emotional trauma of losing their breadwinner, a term insurance for family helps them financially as well by being there when they have to go on with financial commitments, deal with outstanding debts, and purchase cheap protection.

Income Replacement

One of the main benefits of term insurance is that it pays out a lump sum which can be used to replace the income of the insured. With income replacement term insurance, the family will still be able to take care of their normal living expenses, the children's education, and other necessary financial commitments.

Coverage of Long-Term Obligations

It is true that most families today have heavily levered their future through various long-term commitments like housing loans, children's education, and retirement planning. A term policy is the right instrument to cover your family's financial needs by providing the means to fulfill your family's long-term objectives in case the main earner is no longer around.

Debt Mitigation

Economic meltdown with no end in sight could make outstanding debts a suffocating financial burden for the family, in case of death of the sole breadwinner. A term insurance cover could help repay the loans without exhausting the family savings.

Cost-Effective Protection

Term insurance is the most affordable pure protection life insurance plan that offers a policyholder the possibility of getting a high sum insured for a relatively small amount of premium. As a result, a policyholder can ensure that the dependents are well protected without having to reduce the current level of living or making other financial sacrifices.

Key Factors in Selecting Term Insurance

Among the considerations when looking at term insurance, the main ones are:

Coverage Amount: The insurance should be able to cover the loss of income, the outstanding liabilities, and future needs. As a rule of thumb, the amount can range from 10 to 15 times the yearly income, and then be adjusted according to inflation and the family's needs. Using a term insurance calculator to know how much coverage you would need will give you the most accurate results.
Policy Term: The length of the policy should be as long as the time the family will be financially dependent on the policyholder. For example, the time when children are still dependent on parents, the time taken for paying off a loan, or the time until retirement.
Riders and Add-ons: Some additional options such as critical illness cover, accidental death benefits, or premium waivers, can be purchased to increase the protection and cover the specific risks one is most likely to meet.
Policyholder Age and Health: The younger you are when you purchase a policy, the more likely you will get cheaper premiums and less difficult underwriting will be required from you.

Summing Up

The breadwinner is primarily responsible for establishing a financial safety net for dependents. Term coverage, by offering a fixed, reasonably priced, and reliable contract, forms an essential part of this financial security. Well, designed term insurance policies ensure that the earnings stream is not interrupted, thus enabling the fulfillment of long, term commitments, decreasing borrowing risks, and taking care of the family members' welfare. Term insurance is a very important instrument in risk control and family financial planning that gives the family both safety and confidence in the future.

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FAQs

What is a good financial safety net?

A good financial safety net consists of several components, including term insurance, emergency savings, and investment plans. These are the measures you put in place to be able to maintain your lifestyle even when things go wrong unexpectedly such as you suddenly get sick, lose your job or have an accident that causes your income to be affected, or you require money for treatment.
How much money should you have for a safety net?

The rule of thumb is to have an emergency fund sufficient to cover your living expenses for 3 to 6 months. In addition to that, having a term insurance for family can safeguard the family even further in case of an unforeseen demise.
What is a financial safety net?

Financial safety net refers to the amalgamation of savings, investments, plus insurance, such as term insurance, with the sole aim of shielding you and your family from any financial strains resulting from unemployment, health mishaps, or accidents.
How much should a 25 year old have saved in India?

A 25-year-old should set a target of at least 6 months of living expenses saved as an emergency fund. The addition of a term insurance for a family plan will not only help secure the future but also provide a platform for long-term growth through investment.
How to make a financial safety net?

You can assemble a financial safety net by first setting aside money for emergencies, then buying low-risk investment products, and also obtaining the necessary term insurance policy. Keep evaluating your savings and modifying it with the evolution of your financial status.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. ₹360/month is the starting price for a ₹99 lakhs loan cover with an 8% interest rate for an 18-year-old male, non-smoker, with no pre-existing diseases, loan tenure up to 20 years, rounded off to the nearest 10

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale

Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.

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