How Much Term Insurance Cover Do I Require?
Updated On Aug 21, 2021
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Has financial security of your loved ones become a major concern for you? Do you often think what would happen to your family members if one day you are not there anymore? If thoughts like these and more have consumed your mind more than ever, go ahead and buy the best term insurance policy. Why term insurance? It is because your term insurance policy will play a significant role in ensuring that your family members are financially stable in the event of your unfortunate demise. How? In case of your unfortunate death during the policy tenure, the insurance company, in return for the premium you pay for the policy, will provide a sum assured to your family. Note that the most important aspect would be selecting the right sum assured amount to avoid issues later.
How to Calculate the Required Term Insurance Coverage?
Below mentioned steps will help you in finding out the desired and appropriate sum assured amount for your term insurance so that you are not short of funds when you need them the most. The steps include:
Calculate Your Dependent’s Monthly Expenses
Find out the monthly expenses of the dependants in your house. According to the experts, the term insurance sum assured amount should be 10-15 times of the annual expenses. It is because with the passage of time, higher inflation, rising child education costs, healthcare costs for the elderly in the house are expected. A significant sum assured amount would be enough for the family to bear all the expenses and cover all financial goals without any hassle.
People take debts for various purposes. However, what makes being in debt more troublesome when one leaves their family with a pile of debt? Therefore, it is highly recommended that one calculates their liabilities to gain a better idea of the sum assured amount.
Assess Major Life Events & Goals
Assessment of important life events and goals is highly recommended so one that none of these goals are put in jeopardy. These goals could be any, right from education, marriage to travel or buying a home. It is always wise to add the amount related to life goals to the sum assured so that an untimely death does not become the end of peace of mind for others.
Consider Retirement Corpus for Spouse
You may also want to leave a corpus for your spouse that they can make the most of in managing their retirement.
Considering Existing Wealth
Consider all the investments (provident fund, mutual funds, fixed deposits, real estate and more) that you have made over the years. These investments will be accessible for your loved ones upon your demise. You can deduct the amount from the sum assured or the term insurance coverage you need.
You may also like to read - Should You Buy Add-Ons With a Term Insurance Plan?
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.