Losing a loved one would be the worst thing that can happen to anyone, especially if the loved one also happens to be the only earning member of the family it is a complete disaster. As quoted-Time is a great healer, but the emotional pain will only aggravate further if that monthly income or financial cushion goes missing forever. Let’s not debate on the importance of a term insurance cover, but the question still arises to how much Cover should one have? Don’t stress this article will help you come to a pretty good conclusion of an approximate figure for your cover.
Ideally, a term Insurance should at least be 15-20 times of your annual income. This is a simple formula often recommended by industry experts. Assume your annual income is Rs.5 lakh, you should get covered for a minimum of Rs. 75 lakh to Rs.1 crore.
Mentioned below are some of the important things that you should consider while calculating how much term insurance cover you need:
Your insurance cover is mainly calculated depending on your current age. Most probably you will be the bread earner of the family when you are in your late twenties and early thirties. At this stage, you are loaded with more liabilities than assets. As you start earning gradually, you will save more income and your assets will eventually balance your liabilities. This is the reason you need less protection cover than what you require when are young. However, remember that low age works in your favour as you tend to get a higher coverage at an economical or an affordable cost. Besides, the premium too work out less when you are young.
We all lead a different lifestyle basedupon the income that we earn. Your family also gets used to the lifestyle that you have been providing them. In any uncertain circumstances, downgrading your lifestyle substantially all of a sudden will be a major problem for your family members. This process of downgrading lifestyle does take a lot of time and therefore should be done gradually, however, we need to ensure that the basic necessities of a certain lifestyle should be met at all times. Calculating the expenses to meet the basic necessities of your lifestyle would be the best thing you can do to protect your family from financial suffering. Therefore, all you need to do is write down the amount which is required on a monthly or an annually in order to calculate the cost of running your family.
These two play a very important role in figuring out the amount that we should invest in a term insurance plan. These days when you apply for a loan, it is usually strongly recommended by the financial institutions to get insurancecover on it. This way you are covered against the loan if something uncertain happens to you. Say for instance, personal loans, car loans or loans taken to buy expensive gadgets are common these days. Therefore, a term insurance plan will be of help to pay off any unprotected loan in your absence.
Education plays a very important role to shape up your child’s future. This is the reason why we wish to give the best to our children always. Taking this into consideration you can calculate expenses for education you would need to fund for securing your child’s future. A wedding of a family member is usually a big affair and therefore is a major expense too. This is the reason you need to keep one thing in mind, that there are no financial constraints faced by your family in your absence. Calculating a lump sum figure would keep the wedding bells tinkling in your absence.
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