Financial stress can be a killer. The rising costs of living are cause for concern in our day-to-day lives. As your bank balance dips, you cannot help wishing for a rich uncle whose fortune you might inherit or for brilliant luck that helps you win a lottery. But even without all that, one can work towards a secure financial future. Saving in a disciplined manner, staying out of debt, maintaining budgets and making intelligent investments are all small steps towards financial security.
Insurance is particularly useful in securing the financial future of individuals and their families. Let us examine some of the ways in which insurance promises financial security.
1. Income – The primary objective of life insurance is to provide monetary security to the policyholder's family in the event of his/her death. Do you have a high death cover? It could take care of your family's expenses for a long time provided you plan it correctly. If you are the sole earning member, a larger policy that accounts for regular expenses, education costs and medical bills as well as inflation will go a long way in ensuring financial security for your family.
2. Retirement – Insurance gives you the opportunity to build a regular income for your post-retirement years. One never knows whether one's pension will beat inflationary pressures. If you are un likely to receive a pension after retirement, an insurance policy would be a necessary safeguard. Insurance encourages people to save in a disciplined manner over the long term. Hence, even if you paid relatively low premiums over the years, it would accumulate into a large sum at the end.
3. Children's Future – Parents often look at insurance as a way to plan for their children's future. The cost of education, particularly higher education, is unlikely to drop in the near future. If you already have an insurance plan in place, you could battle the prohibitive costs of higher education. It is preferable to have an insurance policy that pays out or allows withdrawals by the time your son or daughter heads to college. This helps one bypass the interest rates associated with student loans.
4. Health – Does your insurer provide coverage against disability and long term medical care? You may be healthy as an ox today, but one can never predict what tomorrow will bring. What if an accident or a disease were to lay you up for an indefinite period? The correct types of insurance coverage will protect you and your family financially even if you are unable to work for a prolonged period.
5. Property – If you own a house and a car, you should have homeowner's and motor insurance in place. These protect you in case of damage or theft. Something like liability insurance – which provides coverage in case a third party is injured on your property or involved in a collision with your car – will secure you from financial ruin following a lawsuit. Insurance also covers repair expenses, and we all know how costly even basic repairs can be. Insurance policies may not prevent death or disease; they may not prevent your car from being stolen or your house from being destroyed by fire. However, they provide an affordable option that will keep you and your family afloat even in the face of heavy expenses in the future.
The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal
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You may write to the author at Deepak@myinsuranceclub.com