Confused over how much term insurance should you buy? Is there a magical formula to reach this figure? Read on to know the answer.
The worst thing that can happen to anyone is losing your loved one. If the loved one also happens to be the bread winner of the family it is a complete disaster.
As they say, “Time is a great healer” but the emotional pain will only aggravate further if that monthly income or financial cushion goes missing forever. So let’s not debate on having a term insurance cover, but how much, is the head scratching million dollar question? Don’t worry, this article will help you come to a pretty good approximate figure.
A term Insurance cover should be 15-20 times of your annual income. Industry experts often recommend this simple formula. For example - If your annual income is Rs.6 lakh, then you should get cover for minimum Rs. 90 lakh to Rs.1.20 crore.
Here are some of the top things to consider while calculating how much term insurance cover you need
Your current age is a core factor in deciding how much insurance you will need. If you are young in your late twenties and early thirties, you are on the verge of becoming the main bread winner in the family. Your life balance sheet has more liabilities than assets. As you gradually earn and save more income your assets will balance your liabilities. That’s why in the Old age, you need less protection cover than what you require when are young. The good thing is low age works in your favor as you get a higher cover at an economical or an affordable cost. The premium calculation works out less when age is low, unless you have a dangerous job of a riding stunt bike in the wall of death.
Current Running Cost of Family
Everyone’s lifestyle is different depending upon the income they earn. Your family is used to the lifestyle you provide for them. In any circumstances downgrading your lifestyle substantially will be a huge problem. The process of downgrading lifestyle does take time, but the basic necessities of a certain lifestyle need to be met at all times. You can calculate the expenses that would meet the basic necessities of your lifestyle and protect your family from financial suffering.
So, what you need to do is write down the figure, which is required on a monthly or annual basis to calculate the cost of running your family.
We all know how much education plays a part in the future of a child. We want nothing but the best to give our children so they can secure their future. Taking this into consideration you can calculate for many years of education would you need to fund for securing your child’s or children’s future.
This is a big one. These days when you take a loan it is anyways strongly recommended by financial institutions to get an insurance on it. This way you are covered against the loan if something untoward happens to you. For example – personal loans, car loans or loans taken to buy expensive gadgets are common these days. You should take into consideration any unprotected loan and include in your cover required, which will help in payment in your absence.
You can take into consideration the assets that you have accumulated. This will help you decide on the cover you need. For example – if you took a car loan for 5 lakh and you have paid back Rs. 2 lakh. The remaining Rs. 3 lakh you need to take into consideration when calculating insurance cover.
Choosing of Riders
Due to fierce competition in the insurance industry, companies are finding ways to make their product standout from others. This is done by adding special riders to the policies. Riders are useful depending upon your specific requirements. These riders come at an additional cost. You should check if the riders would enhance your cover or not. If it is not required, then you may leave the rider option. Don’t unnecessarily increase your expense on policy, if you feel the rider would be wasted in your case. However, there are riders which are highly recommended. For example – Waiver of premium rider. This rider will waive your all future premiums if you get critically ill or disabled. Accidental death rider will add to the sum assured to give your family additional financial support in case of an unforeseen accidental death.
Once you take an insurance policy, you have the obligation to pay the premiums as per the payment cycle selected. Although, it is good to get full coverage, sometimes people can get too generous and end up buying extra than needed. You have to ensure that the premiums also need to fit in your disposable income bracket. Any default in premium payments can lapse the policy, exposing you to the risks of not being insured.
Going by the Indian orthodox tradition, family wedding is a big affair and a major expense. Keeping this in mind, you would want to ensure there are no financial constraints faced by your family in your absence. You need to calculate a lump sum figure that would keep the wedding bells tinkling in your absence.
Taking the above points into consideration, you can calculate how much insurance cover you should buy. Once you have understood your need, you can look at various insurance policies that are available in the market.
It will be a tedious task to go through brochure of each and every insurance company for policy selection. The smart and easy way would be to have a platform, where you can view the best deals on offer with a click of a button. Good news is that there is a platform available today to compare insurance plans and buy the right product, which will fulfill their needs. You can compare different term insurance products on our website - Coverfox.com. All you have to do is enter your details and within seconds you will get customized best deals on term insurance plans available in the market.
Furthermore, the term insurance plans will filter and display their crucial features like price, coverage, term duration and claim settlement ratio. When you click on the specific policy more important facts like medical test details, premium payment and grace days offered, sum assured gets displayed. Having such important information displayed in a simple manner with a click of button on Coverfox.com is a boon for the policy buyers. It is also easy to navigate and go back and forth analyzing important factors on offer in different policies on offer.
Wait, that’s not it, there are more benefits of buying online. As you are entering the details yourself, there are less to no chance of discrepancies in your personal information. You don’t have to waste your precious time on photocopying your supporting documents. All documents can be scanned and uploaded directly on the website. This approach will not only save money, but is also environment friendly. The condition of the supporting documents also will never deteriorate over long duration of the policy and will be safely available if ever need arises.
So, what are you waiting for! Go ahead and buy the right term insurance cover for you with confidence.