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Income Protection 101: The Crucial Role of Term Insurance in Financial Planning

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Income Protection 101: The Crucial Role of Term Insurance in Financial Planning

Security keeps us going. It helps us get complacent sometimes, and this may not always be a bad thing. Complacent, in this context, calms the chaos of uncertainty, the ‘what ifs’ that worry us. Money is the one thing that helps everyone earn. From meeting livelihood to education to reducing dependency, chasing independence or just a better lifestyle, all of us chase it. If it is that important, it’s imperative we protect income, right? 

How do you protect your income? 

It depends. Income is something you earn actively in exchange for the profession you pursue. Income can also result from investments, but that’s passive. 

Your aim should be clear. Increase your income and increase your investments. Most investments give you returns, while term insurance is your bedrock for security and protection. Term insurance helps you get insured against the premiums you pay. 

Those of you who know what term insurance is may think about how it helps you. When you have a family to take care of, accounting for their needs is also your responsibility and duties. In case you encounter an unfortunate incident, your beneficiary will receive the sum assured of your term insurance policy. This sum helps them take care of their lives in your absence. It reduces the blow of panicking for income and maintaining the same level of lifestyle. Hence, adding term insurance to your financial plan is crucial. 

Here is how you can add term insurance to your financial plan: 

1. Understand your needs: 

Consider your future insurance needs. Then, arrive at an estimated sum by considering your income and expenses. As a preliminary rule, your term insurance coverage should be at least 10-15 times your annual income. 

2. Create a healthy mix: 

Just like your physical health is a function of exercise and a balanced diet, your financial health is a function of discipline and a risk-balanced investment portfolio. Play to your strengths and ensure your risk appetite is not leveraged heavily. Adding term insurance to the mix can help you balance some of the risk.  

3. Get ahead of time: 

It is likely that you will need more time to get ahead in this life. Investing early always helps. When you begin early, you have the advantage of time on your side. It helps you get affordable premiums and ensures that your health is not something that can affect you. 

4. Check out premiums: 

Premiums for term insurance policies are lower compared to health insurance. Compare different providers and choose what suits your situation and needs the best.

5. Educate yourself: 

When it comes to buying or investing anything, knowledge trumps all. Having the right knowledge about various policies, inclusions, benefits, and other details simplifies the decision-making process. 

Incorporating term insurance into your financial plan is a strategic move towards ensuring income protection and family security. It’s a foundation that not only guards against life’s uncertainties but also reinforces your financial well-being. With careful planning, term insurance becomes a pivotal element in securing a stable future, offering peace of mind and a safety net for your loved ones.

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