Discipline in financial planning can help battle economic instability

A goal without an action plan is a wish. We all have goals and aspirations for various aspects of our life. While the possibility of us achieving our goals is a function of many factors, the likelihood of getting closer to it increases with planning. And planning is an intricate process. The effectiveness of these plans depends on our deep-rooted beliefs that tie back into our experiences in life.
The makers of the famed ship, Titanic, had never accounted for the ship to ever hit a big iceberg – as such an instance had never taken place at that scale. Often, the quest for a good future, makes us overlook certain risks which the process and the discipline of “planning” will assist us in.
Insuring an aspirational class
Globalisation’s impact has transformed not only our economy, but also our lifestyles. Today propelling the consumer-driven economy, millennials are the economy’s chief earners and spenders, allocating as high as 65% of incremental income on entertainment, eating out, apparel, accessories and electronics.
In such a scenario, to battle the possibility of economic instability, life insurance is the one of the viable ways of building financial certainty. It can protect households from the possibility of the passing away of the primary breadwinner and, enabling millennials and next-generation earners to transition to adulthood without disruption in their lifestyles.
Diverse offerings
Like all financial products today, insurance also can be purchased in diverse forms tailor-made for customer requirements, instead of a one-size-fits-all. These can operate simultaneously and offer a spectrum of benefits designed to meet various needs of the nominees.
i. Term insurance plans – Essential to every household to continue functioning and replace the primary breadwinner’s income, the term plan is a fundamental tool of financial protection. It promises to pay the nominee a fixed lump sum assistance as chosen at its inception, in the case of the death of the primary breadwinner. Modern term plans also include the option of riders that offer additional benefits to the policyholder (on payment of additional premium), room for customisation and modernisation. Riders enable insurance coverage at an additional cost covering specific and unique needs of an individual. Some riders are death benefit, critical illness, waiver of premium, family income benefit, etc.
ii. Health insurance and critical illness plans – An important element of any financial plan is health; that is, to account for the cost of the insured’s medical and surgical expenses and offer cover against life threatening diseases. Health insurance plans purchased from a life insurer come with benefits of affordable premium amounts, simple documentation and claims process and the absence of a co-payment criteria.
iii. Child insurance plans – Child plans are specially customised to address a child’s future financial needs, for their higher educational aspirations and ambitions even in the absence of the primary breadwinner. It combines insurance and disciplined savings to ensure that parents are able to give their children a bright future. It can be customised to offer a lump sum payment at the end of policy term. A child plan can provision to meet financial needs of important educational milestones with flexible payouts.
iv. Retirement plans – Culturally we are attuned to putting our needs last in order of priority. However, in the changing social scenario, where nuclear families are almost becoming a norm, it is important to create a financial plan for our own retirement years. We need to create a corpus that will make those lonely retirement years the truly golden years. The best way to start saving for a nest egg is to begin early by starting to save strategically from a young age. Retirement plans provide protection against the breadwinner’s death, during the years when he is saving for the retirement corpus. Thus they ensure that death in no way negatively impacts retirement planning for the spouse.