Human Beings are wired to do whatever it takes to protect their families from risks and other perils. While we do this naturally for physical risks, we seldom think about how we can protect our families against financial hardships that could strike the family in case the earning member of the family were to be no more.

In the wake of nuclear families and with inflation exploding our financial life, Life Insurance has become a vital financial weapon. It is paramount for every individual to first adequately insure their life for the financial security of the dependents and then proceed to address other aspects of financial planning.

In a traditional joint family system, other members of the family could step-in, in case of any financial exigencies. However, with nuclear family system becoming the new order of the day, the probability of family members stepping in to provide financial support is steadily decreasing. When we are young, we normally believe that we will always be there for our families. Yet, with the typical lifestyle that we lead with stress, lack of exercise, poor diet and many others, we increasingly see examples of people around us leaving behind families inadequately provided for. No product can fill the void created by the loss of the breadwinner, but a term plan can address the financial consequences due to this loss.

Each person has a different financial obligation – tending to the needs of the family, planning for a future dream home, investing for child’s higher education, marriage, buying a property, acquiring loan towards a business venture, etc. What happens if before the obligation is met, the earning member is no more? Therefore, just saving towards that isn’t enough. Planning one’s finances is the only way to go about this process.

Financial support cannot replace the family’s breadwinner, but 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. Financial protection is unique to life insurance and hence it should be a key ingredient in every individual’s financial plan.

Financial protection is primarily required for two reasons – to cover liabilities and to secure future income. Term insurance does this in spades. Term insurance is the simplest form of Life Insurance. In this type of a plan, the policyholder pays premiums and in return the life insurance company pays a pre-defined amount of money to the nominee in case of the demise of the policyholder during the tenure of the policy.

A term plan can provide financial stability to the family of the policyholder. As a thumb rule, a young individual should purchase a term plan with a life cover of approximately 20 – 30 times the annual income. For an individual in his forties, a cover of 10 – 20 times is appropriate and for an individual in his fifties, a life cover of 5 – 10 times should be sufficient. As one gets closer to retirement, the need for life cover reduces. The ideal duration of the policy should be until the retirement age. Therefore, the sooner we buy term insurance, the more secure our family’s future is. Leave behind assets not liabilities – this should be the sole motto for providing protection to secure our families.

Term plans are offered by all life insurance companies and have different premium amounts which could create a dilemma for an individual. Buying the cheapest or the most expensive term plan is not the answer. An individual should also study the claim settlement ratio of the life insurer before purchasing the plan.

In conclusion, a financial plan is very important and life insurance should be an integral part of that financial plan. Hence it should be your first step while planning your finances.

To know more about term life insurance plans you can log into HDFC Bank NetBanking (Life Insurance section), visit HDFC Bank website (Life Insurance section) or you can contact your nearest HDFC Bank branch.

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