How Much Term Insurance Do I Need

Points To Consider While Choosing Your Coverage
Conclusion

Term insurance plays an important role in your life to find solutions to these problems. Moreover, a term plan is an excellent way to build a financial safety net. Term Plans are the simplest and most affordable form of insurance which will help your family to settle your loans and take care of their financial requirements in your absence. The death benefit is paid to the beneficiary only upon the insured's death.

The importance of a term insurance cover is indisputable, but how much insurance coverage you should buy is a million-dollar question. Industry experts often recommend this simple formula: A term insurance cover should be 15 to 20 times your annual income.

Points To Consider While Choosing Your Coverage

Here are some crucial things to consider while calculating how much term insurance cover you need.

1. Age: Your current age is an extremely important factor in deciding how much term insurance you will need. In case you are young in your late twenties or early thirties, you are on the verge of becoming the breadwinner of the family. Your life balance sheet has relatively more liabilities than assets. As you gradually start earning and saving more, your assets will balance your liabilities. That is why in your old age, you need lower insurance cover and higher health cover than what you require at a young age. The good thing is that young age works in your favour because you can get higher coverage at an affordable rate. The premium is comparatively less when age is low and vice versa unless you have a dangerous job.

2. Current household expenses: People have different lifestyles depending on their income level. It is crucial to consider that your family is used to the lifestyle you provide for them. In any circumstances, downgrading your current lifestyle can be a huge problem. Changing one’s lifestyle does take time, but the basic necessities of a particular lifestyle needs to be met under all circumstances. You can calculate the expenses that you would require to fulfil the lifestyle you want to give your family and protect them from financial suffering.

3. Children’s education: The importance of education is not unnoticed by any of us. We all want to give the best education to our children to help them secure their future. Keeping this in mind, you can calculate the educational cost of your kids, including their higher education, that you would need to fund for securing your children's future.

4. Loans: In addition to household expenses and children’s education, you must also consider the amount of loan you are liable to pay through your insurance cover. These days when you take a loan, be it a home loan or any other form of a loan, it is strongly recommended by financial institutions to get insurance on it. This way, you are protected against the loan if something unfortunate happens to you.

5. Insurance premiums: Once you buy a term insurance policy, you are liable to pay the premiums as per the payment cycle. Although it is good to get covered entirely against eventualities, sometimes people buy more than they can afford and end up buying extra than needed. You should make sure that the premium amount fits in your budget. Moreover, it is important to note that any default in premium payment may result in policy lapse, exposing you to the risk of not being financially protected.

Conclusion

In India, more than 30 insurance providers are offering various term insurance plans. It is a tedious task to go through a brochure of each and every insurance provider for policy selection. The easy and smart way would be to visit an online platform where you can view and compare the best deals with a click of a few buttons.