Life Insurance Plans To Consider Before Starting A Family
Starting a new family may bring a lot of happiness in one’s life. However, this shift may also be accompanied by a new set of responsibilities. In such a case, if you are going to be the primary breadwinner for your family, the task of family financial planning may fall largely on your shoulders. You may have to start considering long-term financial goals such as saving for your child’s/children's education, buying a home, and building a retirement corpus. This may seem like an overwhelming task; however, with the help of adequate strategies and financial products, it may become easier. Opting for different types of life insurance plans can help you meet these goals effectively. For example, investing in a long-term ULIP (which offers life insurance and investment under one roof) may help you reach your financial goals in a more efficient manner and may help your family live a comfortable life. With that in mind, here’s a look at some of the life insurance plans you may think of opting for before you start a family.
Some of the Life Insurance Plans for Family Financial Planning
A family financial management portfolio may consist of several financial products that may prove to be useful for one or other reasons. Here, we list down some life insurance plans that you may want to consider adding to your financial portfolio as they may often provide multiple features under one product.
While some may focus on wealth creation for retirement, others may veer towards assuring a child’s financial future. However, all of these products offer financial protection to the insured’s loved ones in their absence. Here is a list of some life insurance plans to consider:
• Term Insurance
If you are beginning a family, it may not only be their present but also their future you may have to look out for (especially a future where you may no longer be present). To secure their financial future, you may consider buying term insurance. A term insurance policy is a contract between the insurance company and the policyholder. If the life assured passes away during the policy tenure, the insurance company may provide a lump sum pay-out to the nominees of the deceased.
Premiums of term insurance plans may be usually affordable since they are pure protection plans. With affordable premiums, you may secure an optimum sum assured and relieve yourself of future worries for your family.
Coverage benefits for term insurance plans may be enhanced, through riders by paying a nominal extra premium. For instance, the critical illness insurance rider provides a lump-sum payout on the diagnosis of critical illnesses covered under the plan. The waiver of premium rider waives off the premiums in the case of an accident or the diagnosis of an illness covered therein. Thus, these riders may help to assure that you and your family continue to receive financial support even if unfortunate events may take away your earning capacity.
• ULIP (Unit-Linked Insurance Plan)
A ULIP is a unique product offering a combination of life insurance coverage and market-linked investment opportunities. Life insurance coverage may be useful to you for staying prepared in the case of unfortunate events. However, if you want capital appreciation and a chance to invest in market-linked funds, then a ULIP may offer you that in conjunction with life insurance.
One of the appealing features of ULIPS is the availability of different types of funds to invest. Equity, debt, liquid and balanced options may be typically available with ULIPs.
When you are yet to start a family, you may have a higher risk-bearing capacity, as the family responsibilities may have not begun yet. As your family grows and you undergo life stages, your risk tolerance may also decrease. You may want safer, conservative investment options. Thanks to the fund-switching option, available subject to policy terms & conditions and different portfolio strategies available with ULIPs, you may be able to achieve this balance between risk and returns aptly. For the uninitiated, the fund-switching feature allows the policyholder to transfer their funds from equity to debt and vice versa.
• Child Insurance Plans
Having a child may be an experience like no other. In the newfound feelings and happiness, you may not want to overlook the responsibility of securing their financial future. When wondering how to financially prepare for a baby, one product you may consider, is a child insurance plan. Such a plan provides financial support for your child’s growing years and may assure you of a happy financial future for your child even when you are no longer around.
It may ensure your child has a steady amount of funds to continue their education or pursue other paths as they see fit. These plans may be designed to align with the different life goals of your child. So, besides education, other ventures, such as your child’s marriage, may also be supported by the plan.
• Retirement Plans
You may think, “What is the need for a retirement plan?” since it may be a distant dream for you yet. But with inflation rates rising, it may be better to begin your retirement planning sooner than later. The suitable time to buy a retirement plan may be when you are chalking out family financial planning.
With a retirement plan, you may have to pay a certain amount on a regular basis into the plan. Your retirement corpus grows as you undergo different life stages. By the time your retirement is near, you may have amassed a considerable amount. After your retirement, you may receive this amount via pay-outs. These pay-outs may be monthly, quarterly, half-yearly, or yearly.
A retirement plan which has begun early may have positive outcomes for your family in the long run. It may relieve them of worries about the medical bills that may increase during old age. You may also be assured you do not have to depend on your children or other family members for finances. You may rest easy, knowing your post-working years may be financially taken care of.
Thus, a family financial management portfolio may benefit from including a retirement plan.
How to Begin Family Financial Planning?
Even though you may have an idea of what life insurance plans to consider for your family’s financial planning, you may not know where to start with the overall process of financial planning.
Here’s how you can go about it:
1. Define your family’s financial goals
Note down the long-term goals you may have planned out for yourself and your family. For example, some sample questions you may want to consider can be:
- When do you plan to buy a house?
- How do you plan to pay the down-payment for the home loan, if any?
- Do you want your child to go abroad for higher education? If so, how do you plan to fund it?
- By what age do you wish to retire and what is the timeframe you have till then?
These questions may help you get a clear idea of what needs to be done for your family's financial planning and how you may plan for the same.
2. Make a budget
Before you finalise how to go ahead, it may be crucial to have a budget. To get started, you may want to consider your current income and the expected rise in income for the next few years. Then, you may want to consider your present expenses and future expenses. Debt and inflation should also be kept in mind when creating a budget.
Next, check how much you may be able to save for your family’s future. This may help you make sure your present bills are being paid on time and so are the investments for your family’s future.
3. Know what products to opt for
There are different financial products in the market currently. You may not need to opt for all of them. Hence, with the help of the above two points, list down the products that may help you. The life insurance plans listed above, along with other financial products available in the market may provide a comprehensive package for you to support your family’s goals and aid you in family financial management.
Being prepared for the present and for what may come is important, and it may be even more important when you are starting a family. The points mentioned in the article may help you in the preparation for the same. At the same time, consulting a financial advisor may also help in considering the subjective factors involved in family financial planning.
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