How Life Insurance Goes Beyond Income Replacement

Most of us buy life insurance to financially protect our family in the event of loss of income of the earning member, and to fulfil our family's life goals. Generally, the investments made for achieving these life goals are long-term in nature, making them susceptible to the uncertainties of life. Such unexpected exigencies can endanger one's earnings, and put future plans and economic stability of one’s family at stake. While Life insurance can help protect the uncertainties in life, having a protection for investments is equally critical to ensure your family's life goals are met.

In case one is the sole provider for their family, it is important to ensure that if something unforeseen happens, the surviving family members will have money for bills and expenses. So, the focus must rest on guaranteeing the continuance of existing investments to make sure that one's long-term financial goals can be accomplished regardless of the loss of a regular monthly income. And in order to do that, one must ensure that their life insurance cover is plenty to meet most of the liabilities and the future needs of their family. Hence, Life insurance can go beyond just "income replacement".

Protection and investment plans must go hand-in-hand in safeguarding the financial stability of families and ensure continuity of their life goals. For example, a life cover equivalent to the amount of an education loan can ensure that the children do not lose out on the future prospects, even if the payee is no longer alive to repay the loan.

Since life insurance protects the financial security and the definite investment aspirations of a family, it becomes important to define the portion of the investments that need protection and the ones that don't. It can be segmented, between long-term - investments those that are for five years and above, and short-term - investments that are for a limited period of one to three years. With the uncertainty of life looming at large, this simple division can help one manage the life cover one may need. There are two kinds of covers available - pure protection life insurance plans which help to mitigate the risk on future incomes in case of early death, and traditional life insurance plans which offer a long-term guaranteed return to people. These fixed returns can be used to counterbalance the brunt of sporadic interest rates and unstable share markets on investment returns, thus providing equanimity to one's financial goals.

So, it is wise to insure the investments towards one's long-term life goals usually when the investment plan is of five years and above. This is the best way to ensure that one's loved ones continue to meet their life goals no matter what.