In the wake of increasing inflation, shift to nuclear families and change in lifestyle patterns, life insurance assumes vital importance.It is paramount for every individual to first adequately insure his life for the financial security of his/her dependants and then proceed to address other aspects of financial planning.
Financial planning is a dynamic process that involves charting an individual's financial goals and longterm objectives in conjunction with ways and means of achieving those long-term goals and objectives.
This includes elements of protection, wealth creation, planning for contingencies and emergencies as well as planning for specific milestones in life.
Importantly, an individual's financial plan should be reviewed to be in sync with his different life stages and the various requirements that are specific to a certain stage in life.
Changing circumstances like marriage, purchase of a house, child's education mandate that the financial plan evolves to meet these objectives within the given timeline.
Today, an individual has an array of options to choose from when s/he starts financial planning. It is observed that people tend to focus on the 'wealth creation' aspect of financial planning and the 'protection' element often gets compromised or neglected.
While the loss of life of the family's bread-winner is irreplaceable, being adequately insured guarantees that the dependents are provided with the much-needed funds to be financially independent and largely keeps the family's financial plans on track without having to compromise on their standard of living.
This aspect of protection is unique to life insurance and hence it should be a key ingredient in an individual's financial plan.
As a risk-management tool, the importance of adequate life insurance in an individual's financial plan cannot be over emphasised. The relevance of life insurance as a longterm protection-cum-savings tool also comes from its primary feature of it being a need-based financial instrument that helps one meet every life stage need.
It provides the much needed peace of mind and at times actually stimulates enhanced risktaking ability of the individual. Every individual needs to asses his or her life insurance needs depending on an assortment of factors.
Life insurance requirements need to be scientifically assessed depending on the life stage at which the individual is along with current liabilities, expectation of future liabilities, number of dependents, financial goals, life style etc.
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