Benefits Of Purchasing A Life Insurance Policy With High Sum Assured
Updated On Sep 06, 2021
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A life insurance policy can be an important part of your financial planning because it provides excellent financial help to protect you and your family from life's risks. These days, buying a life insurance policy is fairly simple, and many people choose to do so online. However, there are a few frequent pitfalls to avoid when getting life insurance. Understanding the notion of sum assured, which defines your policy's coverage amount, is the first step toward acquiring enough financial coverage from your life insurance. Let's take a closer look at what sum assured is and why it matters when purchasing a life insurance policy.
What is Sum Assured in Life Insurance Plans?
In exchange for receiving premium instalments under a life insurance policy, an insurance company guarantees a policyholder or their legal successors a specific amount if the insured event occurs. This sum may rise or fall over the course of the policy's term, depending on the terms and circumstances of the policy plan you choose. Maturity benefits are available under some types of life insurance plans.
What are the Benefits Of Purchasing A Life Insurance Policy With a High Sum Assured?
Many people intend to go for a sum assured of less than Rs 50 lakhs. One possible explanation is that they believe their premium amount will be excessively high. It's logical to assume that the bigger the sum insured, the higher the premium will be. However, while you may believe you have chosen the appropriate amount of sum assured, there are several reasons why you should choose a bigger sum assured in your insurance policy.
1. Combat Inflation
The cost of living has skyrocketed. Luxury items and basics like food and travel have soared in price in the last five years. This is why you should consider the rate of inflation in 10 or 20 years and decide the coverage. While you may believe that an amount promised of 40 or 50 lakhs will be sufficient for your family, this is not always the case. And if it doesn't, your family members will have to make sacrifices in their lifestyle.
2. Loan & Debts Coverage
You may have assessed your family's daily expenses, as well as the costs of your child's school. But what about loan repayments or EMIs? If you've taken out a personal loan or a home loan, it's a good idea to choose a sum assured that's large enough to cover the outstanding balance. This way, your family will be financially secure if something tragic happens to you, and your loans will be covered by your sum assured after your demise.
3. Affordable Premium
Many people believe that choosing a big sum assured will result in a high premium amount. However, when you take out a term insurance plan, a bigger sum assured of up to Rs 1 Crore is affordable and not prohibitively expensive. You don't want your family to make a sacrifice just because you have to pay a higher premium at the moment.
Due to the Covid-19 pandemic, life, as we know it, has changed. Protecting our health and our loved ones has become more vital than ever, and having a life insurance policy to cover future contingency needs is a must. Here making the appropriate decision about the sum assured, which is a crucial component of your insurance, will help you win the battle for your loved ones' financial security.
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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.