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How Much Life Insurance Cover Should You Have?

Published On Sep 07, 2021 9:00 AM By InsuranceDekho

Purchasing life insurance is a wise decision that offers financial security for your loved ones. The amount of life insurance you require is determined by your personal and financial circumstances and should cover your dependents as well as your daily living costs. You may figure out how much life insurance you need by adding up your financial responsibilities and subtracting your liquid assets. Read on to find out how to figure out how much life insurance you need.

How Much Life Insurance Cover Should You Have?

While financial commitments are significant, there are other aspects of your personal circumstances to consider that could influence your life insurance purchase.

  • Family and Dependents

The expenses of raising a child or caring for an elderly parent are extremely costly. If you have any dependents, your insurance coverage may need to be increased multifold. Varying situations need different levels of coverage. Whether you're expecting your first-born or an empty-nester, there's a level of life insurance that's right for you.

  • Your Health and Age 

Your age and health will affect not only how much insurance you should get, but also how long you should keep it. As you get older, you'll probably need less insurance because you'll have less debt and fewer dependents to maintain. Although age is a factor to consider when determining the amount of coverage you need, it is not an excuse to put off acquiring a policy. Since older people are more difficult to insure due to the risk involved, life insurance premiums rise. You can get a lower premium for a possibly higher amount of coverage if you buy a policy when you're young and healthy. As a result, you should lock in reduced rates as soon as possible.

Must read: How Riders Help In Enhancing The Life Insurance Cover?    

  • Everyday Living Expenditure 

When considering how much life insurance you require, keep in mind your regular living expenditures. This covers the amount you spend on food and restaurants each year, as well as bills, clothing, entertainment, vacations, housing fees or rent, and even streaming services.

  • Premium Rates

If you can't afford to pay the policy premiums, your life insurance coverage will lapse. Bigger premiums are associated with higher coverage quantities and longer-term lengths. You must choose between term life insurance and whole life insurance. Because whole life insurance can be five to 15 times more expensive than term insurance, most customers, especially those on a budget, should choose term plans. A life insurance policy's actual cost is determined by a variety of criteria, including your medical history, lifestyle, and driving record. A qualified insurance agent or broker can guide you through the life insurance shopping process and provide you with individualised quotations.

  • Future Milestones 

If you have children, you should consider the cost of a college education when deciding whether or not to purchase life insurance, as paying tuition can be one of the most expensive aspects of adult life. College education generally includes boarding and other additional costs in addition to tuition. Getting the correct amount of coverage will necessitate budgeting for future college costs and marriage expenses, which will certainly be higher than now.

Take Away

It is recommended to purchase life insurance equal to 10-15 times your current annual income. Because the cost of living fluctuates over time due to inflation, the number of dependents you have, and income changes, you can attempt to use an anticipated average cost for the duration of your policy to account for variances.

Also read: Does Life Insurance Cover Suicide?

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.    

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