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Is Your Term Insurance Cover Adequate? Find Out Here
Mumbai, November 26, 2020
Purchasing the right term insurance plan is vital; therefore, it is advisable to do in-depth research and careful planning. While researching, you should understand if the term policy can protect you and your family adequately. Having sufficient coverage is necessary, and it should be one of the most crucial factors to consider while buying term life insurance. It is best to review your insurance plan to check if have enough coverage or not.
Determining adequate insurance coverage
One of the primary reasons to procure a term insurance policy is to protect your family and yourself against financial obstacles and unforeseen situations. Such a policy is a safety net that looks after your family in case of your untimely absence. An effective way to check if you have high coverage is to consider your annual income. The basic rule is that you should have insurance coverage, which is at least ten times your yearly salary. For example, if your annual income is INR 20 lakh, your insurance coverage should be a minimum of INR 2 crore.
You can also use a Human Life Value (HLV) method to ascertain your insurance coverage. Here, make use of a term insurance calculator to determine your net worth. You will have to consider all your expenses, income, liabilities, future responsibilities, and financial goals of your family to finalize the appropriate coverage amount.
Reasons behind inadequate life coverage
Life goals change with time
Generally, people buy an insurance policy at different life stages, like after getting a new job or promotion, post their wedding, or when starting a family. If you have purchased an insurance policy some years back, you may think that you are not adequately covered. It is because your monetary objectives are bound to change over time. Your income, expenses, financial aspirations, and lifestyle will vary as time progresses. Therefore, it is necessary to analyze your insurance coverage and align it with your changing financial goals.
Rate of inflation
While buying an insurance policy, you should consider your current income, life goals, and inflation rate. Inflation rates are volatile, and they continuously keep changing every year. You may feel that the insurance policy does not provide enough coverage because of the fluctuating inflation rates. It is essential to consider this and invest in a comprehensive term insurance plan that can shield your family effectively against volatile inflation rates.
How to have adequate insurance
High insurance coverage is necessary to help your family live a financially independent and stress-free life, especially when you are not around.
An ideal method to check if you have enough insurance coverage is by re-evaluating your ambitions at an interval of every two to three years. Various developments may occur during your life span. These include an increment in salary, better employment opportunities, the addition of a new member to the family, and the inclusion of new assets, like a car, house, or vacation home. All this expenditure may make you think whether your insurance policy isenough to protect you against the financial needs. Whenever such changes occur, monitor your existing policy and check if you and your family are adequately covered.
It would be best if you were extremely prudent about investments and savings. It is advisable to make sound investments and save abundantly that your family’s requirements are well caredfor. Look at your life goals, expenses, annual income, and other factors to invest and save in financial products for a better and safer life. Make sure to inculcate the habit of saving and investing at a young age so that you can reap better returns.
Many people invest in insurance policies only to save taxes. Due to this outlook, they are unable to make the most of their insurance plans. They should understand the need to secure thefinancial future of their loved ones. Term life insurance offers a high sum assured at an affordable premium. So, buy a suitable term plan that can meet your family’s needs.
(Disclaimer: This is branded content. Readers are advised to exercise due diligence and discretion before entering into any correspondence, investment, purchase, business dealings or any other decision on the basis of this content.)