Financial experts always state the importance of passive income for financially securing your life and that of your loved ones. However, have you ever thought about how to use these funds for your family's economic well-being?

One of the best methods in this regard is to buy term insurance with passive income. How may it work out for you?

Keep reading to find out!

Passive income refers to earnings that you can generate from a service without actively working for it. It refers to the money earned from returns on your savings and investments like stocks, mutual funds, fixed-income instruments, monthly income plans, pension plans, and more.

You can utilise these funds in many ways, like catering to additional household costs, taking care of your dependents, achieving future financial goals, etc. Also, you can use the money to buy more income-generating assets that help build your passive income over time.

Active income tends to generate itself with little active involvement from your end. Moreover, in the case of assets like mutual funds, dividend stocks, high-yield savings accounts, etc., you can get the benefits of compounding, which promotes long-term capital appreciation.

Thus, it is ideal to ensure that your family has access to adequate funds to cover their expenses and fulfil life goals even in your absence.

Now, passive income from stocks and other assets is volatile and tends to differ based on market conditions. Thus, they might not be enough to cater to your family’s income requirements in the event of your unfortunate demise. In this regard, it can be a smart move to buy term insurance with passive income.

It enables your nominees to receive a death benefit if you pass away within the policy period. You can set the payout mode according to their income requirements, allowing them to use the funds to cover a wide range of expenses, such as household costs, debt, school fees, credit card bills, and more.

Determine Your Family’s Financial Needs

When selecting the sum assured for a term plan, ensure that it is enough to cater to the financial needs of your financial dependents. Also, consider your loved ones' life goals and determine an amount that will be adequate to cover the costs.

Financial experts recommend opting for a sum assured that is 10 to 12 times your annual income.

Assess Their Income Requirements

Factor in Inflation

When determining an appropriate sum assured for your family, you also need to factor in inflation and the resultant rise in prices in the upcoming years. It can potentially reduce the value of the funds your family will receive as the death benefit, compromising their financial well-being.

Thus, to mitigate this effect, it is always advisable to go for a higher sum assured.

Explore the Various Term Plans

• Level Term Insurance
• Convertible Term Insurance
• Term Insurance with Return of Premium
• Increasing Term Insurance
• Decreasing Term Insurance

Ensure to research them all to choose a plan that best aligns with your financial requirements.

Opt for Optional Riders

Term insurance plans only cover your unfortunate death within the policy period. However, several other circumstances can threaten your family’s financial security and are not included in your basic term plan. To gain coverage in such situations, you can choose optional riders. 

Accidental total and permanent disability riders, terminal illness riders, and waiver of premium riders are some of the most popular ones.