It is the innate desire of every individual to have more than one source of income. It is vital to support the family’s financial goals and especially beneficial to families that are financially dependent on a single person. One of the best ways to generate an alternative income source for your family is passive income.
Before discussing why to use passive income to buy term insurance, let us first understand passive income.
What is passive income?
As the name suggests, a passive income is an alternative income or secondary income that you can generate without working hard for it. This means you may need not rely on your business or employment and still earn a regular income to meet your and your family’s everyday needs and future financial goals.
One of the most common ways to generate passive income is to invest in different income-generating assets like equity stocks, monthly pension plans, fixed income investments, etc. Many people believe that since they have a decent passive income, they need not save more money or buy term insurance.
Buying term insurance with passive income
You must know that the passive income or income from your investments can be highly volatile, and the income you get largely depends on the market condition and economic factors. This means that if the market is dipping, your income will also reduce, and you may have to be flexible with your budget.
One of the best ways to beat the uncertainty of passive income, give your family robust financial protection, and secure their future is to purchase a term life insurance policy. A term plan not only gives your family the financial cushion until the dependents become financially independent but also help you meet your long-term goals.
The sum assured amount of the term life insurance policy could help your family meet significant expenses later in life like children’s education, marriage, etc.
Another significant benefit of buying term insurance for your family is that they can use policy benefits to meet their regular expenses and even pay off the dues like a home loan (if any). This means your family need not dig into their savings or accumulated wealth from passive income. Your family can be financially independent even in your absence.
Additionally, the lump sum that your family receives from the term insurance company can be used for their future goals. Your family can invest it in fixed returns like fixed deposits so that your children can inherit the same in the future when they become an adult.
Considering the growing inflation, you can make the most out of your term insurance by periodically increasing the sum assured amount to keep with the increasing financial requirements at different life stages.
For example, if you purchased term insurance when you were married, you must have chosen a smaller sum assured. However, when you get married, you would have to bear additional responsibility for your spouse and children. This means you would need a higher sum assured to protect the financial needs of your spouse and children.
Final Word
Buying a term insurance policy is beneficial for all. It assures you that your family will never face any financial hassles.
