The Covid-19 pandemic has reinforced the uncertainties that we face in life and brought forward the importance of safeguarding our families financially. For many Indians who bought life insurance for either investment or tax purposes, it has particularly been a wake-up call to reassess the protection element in their existing life insurance policies or to purchase an appropriate cover if they are not adequately protected.
“Amid the pandemic, mortality risk has undergone a slight change and the scales may tilt adversely. Hence, it has become increasingly important to review the protection segment in one’s portfolio as the higher insurance cover is obtained at a lesser premium,” said Atri Chakraborty, Chief Operating Officer, India First Life.
A life insurance policy’s primary aim is to provide a safety net in case of an unfortunate event. The pandemic has highlighted the importance of having an insurance policy like never before, said Yashraj Suvanam, VP & Head – Products & Digital Alliances at Aegon Life.
It is crucial to realign your policy coverage to the overall protection needs of your family and make up for any inadequacies at the earliest.
Rising awareness about term life insurance aided by the fear psychosis induced by the COVID-19 pandemic, has resulted in a sharp rise in the total annual premium equivalent (APE) across the life insurance industry, as per a Motilal Oswal Financial Services report.
Chakraborty from India First Life insurance agrees that due to the fear of unknown, customers are relying more on standard term insurance product for an adequate sum assured at affordable premiums.
Assessing the protection element
Life insurance policies are meant to become financial support of the family after the untimely death of the bread earner of the family. “But the financial support can become insufficient in case it is not calculated properly to secure the future. The pandemic has drastically impacted several things like life risk, medical inflation, retail inflation etc,” said Naval Goel, Founder & CEO, Policyx.com.
“So the life insurance policy should have enough sum assured amount to meet the necessary requirements of the family such as kids’ education, home loan or your spouse security,” he added.
Additionally, as a parent, one has the added responsibility of planning for contingencies, that will shield your children and family from financial woes, even when you may not be around. For fathers, therefore a basic financial plan must include life healthy mix of asset protection, wealth building, health protection, and insurance coverage, adds Chakraborty.
Importance of term insurance for adequate protection
For fathers who maybe the primary breadwinner in the family and have a significant amount of debt, insurance can help secure the family.
“However, to cover for other circumstances such as disability or accident or critical illness, you can opt for riders that come with an additional premium cost,” he added.
One may also look at insurance policies that offer dual benefits of protection along with savings. “With such plans, there is a guaranteed return after the policy term stated upfront while buying the policy, ensuring savings. They also come with a protection element that provides a lump-sum amount to your loved ones in case something happens to you,” adds Suvanam.
Plan for Retirement
Another important aspect that fathers need to plan for is retirement planning especially with increasing longevity. It is advisable to start investing in a Pension scheme or a guaranteed income plan at a young age to be financially independent after retirement.
Lastly a piece of advice for fathers to ensure financial security of the family: “When you are buying an insurance policy for your family and yourself, always keep your family members informed of the policies especially, the nominees. The terms and conditions of the policies must always be informed to them,” adds Suvanam.
Also, as fathers, it is very important to prepare your children for any unforeseen event. To equip them with the right knowledge and understanding about the real-world dealing will only help them manage their finances independently.
“To cover short-term needs as well as long-term goals, starting financial planning early is of utmost importance. It helps one secure the certainties of life by promising a financially safe and fulfilled future to the entire family,” adds Chakraborty, Chief Operating Officer, India First Life.