If you are the sole breadwinner in your family, or even if you are among the many earning members in your family and contribute to the total income in some way, you will certainly appreciate the importance of ensuring that your loved ones are financially secure. However, if the past few years have taught us anything, it is that financial risks and contingencies can crop up at any time.

To protect your family against such financial risks and ensure that they have a reliable financial safety net to fall back on, you need to have a plan in place. Here are some top ideas to keep your family financially secure, no matter what curveball life throws your way.

1. Have an emergency fund in place

An unexpected financial emergency may be just around the corner. There may be a medical issue for a family member that requires a huge outlay of funds. An accidental injury may need some major surgery. Or other contingencies like a sudden job loss or a major home repair may lead to significant expenses. During such times, you may have to dip into your savings or withdraw funds from your investments. Unless, of course, you have an emergency fund.

Also known as a contingency fund, this is simply a liquid and easily accessible investment avenue that helps you pay for such emergencies. Your emergency fund should ideally be equal to at least six months’ earnings. If you can afford to, you can build a larger corpus. Some suitable investment avenues for an emergency fund are —

  • Liquid mutual funds
  • Short-term debt funds
  • Short-term recurring deposits
  • Short-term fixed deposits
2.       Make sure you have adequate life insurance

Life insurance is a financial product that is specifically designed to help you protect your loved ones in your absence. In case something untoward happens to you, your family may lose their major (or only) source of income. A life cover ensures that even during such turbulent times, your loved ones will not be financially inconvenienced.

This is because in case of your demise, the life insurer will pay out the sum assured under the policy to your nominees. Today, you can get life covers as large as Rs. 1 crore or higher at highly affordable premiums. There are also different types of life insurance plans you can choose from, such as —

  • Term insurance, which is a pure life cover
  • Endowment plans, which have an element of guaranteed savings
  • Unit Linked Insurance Plans, which offer both insurance and investment benefits
  • Whole life insurance plans, which offer a life cover til the age of 99 years
3. Buy a health insurance plan

In addition to life insurance, a health insurance plan can also make it easier for you to secure your family financially. This is because in case of a medical emergency, you need not pay for the costs of surgery or hospitalisation out of pocket if you have a health insurance plan. This is because the insurer either pays for these costs or reimburses them to you, depending on the hospital you choose to visit.

By having a health insurance plan in your portfolio, you essentially get to keep your savings intact if there is any medical emergency at home. Furthermore, to truly protect your loved ones, you can even opt for a family floater health insurance plan, which covers your spouse and your children under one policy.

4. Assign nominees to all your investments

Merely investing is not enough. You need to also ensure that in case something untoward happens to you, your family can easily access your investments. Nomination can help here. Most investment options offer a nomination facility, where you can assign your spouse, child or any other dependent family member as a nominee.

For instance, you can assign a nominee for your Employee Provident Fund (EPF) account, your savings bank account, your fixed deposit and recurring deposit and even your mutual fund investments. This makes it easier for your family to access the funds in your investment accounts in your absence. Having a will is another essential step to securing your family’s future.

Conclusion

These small yet significant steps can help you protect your family financially even when the times are tough. If you have not taken these measures yet, it is best to start now and make the effort to secure your family’s future. Take the help of a financial advisor if you need it, so you can fastrack and streamline your action plan to keep your family financially protected in the face of any kind of adversity.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.