Term life insurance is necessary for the financial well-being of your loved ones in your absence. It is a plan that provides financial security to the nominee of an insured person. In the event of the death of the policy holder, the nominee can claim death benefits from the insurance company. This payout can help the family of the insured to secure their future and take care of the responsibilities and liabilities.
What is your ideal cover?
The common thumb rule for purchasing a life insurance policy is that a person should have a sum assured of at least 20 times their annual income. Hence, if your annual income is Rs 5 lakh, you should have a term life insurance cover of at least Rs 1 crore to help your loved ones cover their expenses and maintain their standard of living. Besides annual income, there are other factors that you should consider while deciding the sum assured amount. Liabilities, such as outstanding debts and loans is a major factor to be considered. In your absence, your family would also have to manage to pay off the loans and other expenses besides handling the routine monthly expenditure. Hence, you have to ensure that your cover is sufficient enough to manage your existing and future liabilities.
Another factor influencing the sum assured amount is the future goals. Your sum assured amount should be large enough to meet your family’s financial and life goals such as education, marriage and other goals that they set for themselves in the future. They should be able to maintain their lifestyle and meet any future obligations in your absence.
When is the best time to take a life insurance policy?
You must consider buying a term life cover at your key life stages.
When you get your first job: Buying a term plan when you have started your job is ideal. This is because at this stage you are in the prime of your health and hence can enjoy purchasing a term plan with relatively lower premium for the entire policy term. Your sum assured should cover your future goals, liabilities such as repaying any outstanding education loan and also provide security to your ageing parents. Since the premium that is once paid at this age would not increase with age and is fixed for the entire policy duration, buying at this stage would be suitable.
When you get married: Purchase of a term plan upon getting married is suitable since at this stage in life, you have to protect the future of your spouse and leave them secured in case of any unfortunate event. At this stage, your expenses and liabilities such as loans and debts are also likely to increase. A term plan would help you protect your loved one with a high cover at an affordable premium.
When you start a family: Parents need to protect their children’s future and dreams and make sure their lifestyle isn’t compromised in case of any unforeseen event. A term plan will ensure that your child’s education, marriage and other dreams and goals will be met without financial difficulty. The claim payout will ensure that your children are in a position to take care of the financial liabilities along with other expenses without any compromise in their lifestyle.
At any life stage, whether you are single, newly married, a parent or have retired parents, a life insurance policy will make your loved ones financially prepared to have a secured life.
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