The road towards financial freedom should be in making all our expenses covered by our passive income sources. People who wish for financial freedom usually find alternative sources of income. Slowly and gradually those alternative sources of income will become sufficient to cover the basic needs. This way after a point the primary source of income may no longer be required to continue living. This is one perspective of looking at financial freedom. It is not necessarily true that everyone will have to follow the same path toward financial independence, but a similar idea would be good.
Importance of Life insurance
In countries like India, we don't have any medical benefits or life coverage available by default. If a 20-year-old person is the breadwinner of a family and if he falls sick with a long-term disease, there is no basic coverage available to take care of his family. In many countries, there is basic medical coverage available to take care of the basic medical needs of someone who has retired. This is a post-retirement benefit that the government is offering. This free medical facility is not available in many countries and India is one such country where there is no basic medical facility available in many places.
Even though the situation is improving in many remote places in India, having a Life insurance cover is becoming an important thing. The main reason is that if someone dies due to some unexpected circumstance, there will be nobody available to take care of the family of that person. In that case, if a lump sum amount is available for the family, they can either live with that money or they can plan on living with that money as long as they can.
Sufficient passive income coverage
Passive income should be in such a way that it can cover some of the major expenses of a family. To give a simple example, if we are spending some amount of money on Internet bills every month let's say 10$ a month. If this amount is brought to us through a passive income, that is the very first step. We don't have to worry about internet bills anymore because it is covered with passive income. Similar to this life insurance coverage is an amount that is given to us if we pay an insurance premium every month.
If we are able to earn enough money and keep the money readily available always as an additional income, then we can maybe say that in case of emergencies that money can be used and that can also act as the life cover money. This way we don't have to pay money for premiums and that lump sum money will also be giving us some interest every month if we had invested it in a right way. This is one strategy of looking at life insurance coverage also as an income stream rather than seeing that as a liability for the money that we don't have. The biggest problem is for people who don't have that much amount of money but with savings that amount should be achievable.
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