How To Choose the Right Sum Assured for a Term Plan?
Updated On Jul 18, 2021
Table of Contents
At the time of purchasing a term insurance plan, it is important for the policyholder to realize that buying a term insurance is not done simply to complete the checklist of financial safety. In case, they decide to buy insufficient cover due to low premium cover, then it may not be enough for them or their family members. As they are required to pay a sum assured premium from their income, it is significant to assess their work life.
When talking about purchasing a term insurance, it is important for an individual to correctly evaluate all the different factors such as income, age, health, liabilities, medical history, dependents etc. Given below are the points on how one can easily select the right sum assured under a term insurance plan:
Take into Consideration Major Goals in Life
There are particular phases in one’s life which require planning and financial assistance such as higher education abroad, retirement, marriage. Therefore, under a term plan a sum assured must be done accordingly. For example, in case, one is planning an early retirement then they can decide to go for a term plan with the option of return of premium. Through this way, one can get the life cover till they reach their retirement age and can avail of the maturity benefits to lead a relaxed life after retirement.
Regular Annual Expenses
The whole concept behind purchasing a term insurance plan is to make sure that the family receives financial support that they may require in the absence of the policyholder. This is the reason why it is important for an individual to have precise ideas regarding the lifestyle related expenses of them and their family members. As you are required to pay the premium against your opted life insurance, it is significant for you to know the amount of money you can pay towards it.
Evaluate your Savings, Investments and Liabilities
To choose sufficient sum assured under a term insurance plan, a policyholder is required to calculate their savings, investments and liabilities. Ensure to get all your family members covered along with their lifestyle requirements and other goals without any compromise. It is very important to correctly ascertain your financial condition as the least thing that you would want to happen after your unfortunate demise would be to leave your family behind carrying the burden of your debts.
Other Things to Consider
Other important things that you are required to consider before making any final decision regarding purchasing a particular term insurance plan is checking the claim settlement ratio of your respective insurance company, key inclusions and exclusions offered under the plan,etc.
In a Nutshell
By purchasing a term insurance plan, one can easily build a support net around their loved ones that can act as a financial pillar. During the existing COVID-19 pandemic, the need to purchase a term insurance plan is even more stressed upon, wherein more and more individuals are realizing the significance of a life cover and guaranteed returns in order to tackle the uncertainties in life. Also, apart from buying a term plan, it is even more important to have sufficient coverage. To know the right amount of sum assured required, you can refer to the afore-mentioned points.
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.