The extent of protection your family derives from a term insurance plan depends upon the term insurance cover you chose. The sum assured of your online term insurance plan denotes the amount the family will receive in case of any eventualities. Therefore, it is imperative to choose the term plan coverage carefully to ensure your family gets ample financial security to carry on with dignity. Additionally, it is essential to buy your coverage from a reliable life insurance provider to ensure a seamless purchase, renewal and claim process.
What to consider when calculating term insurance cover?
When you buy a term insurance policy, your age will be a critical determinant of how much coverage you need.
At a younger age, you are at less risk of having some diseases that older people suffer from. Hence, if you buy a term insurance policy when you are young enables you to get a higher cover at an affordable cost. You might not need the slightly high coverage when you have just started earning and do not have many liabilities. However, buying the policy younger will allow you to avail of low premium prices for high term insurance cover.
As you get older, your liabilities may rise, with marriage, family planning, children’s education, buying a house, etc., taking the centre stage. You can increase your coverage at a later age to account for the increased liabilities.
- Parental responsibilities:
If you are a parent, then it is important that you take your child’s education into consideration. Based on this, you can calculate the number of years of education your child would need to secure their future.
Apart from their education, one of the bigger expenses you may face is their marriage as well. Hence, it is important to choose a pure term insurance plan that will safeguard the biggest milestones of your child’s life even in your absence.
- Daily expenditures:
Every individual leads a different lifestyle which depends on the income they earn. When you are the sole breadwinner, the family is accustomed to a certain lifestyle that you have provided for them. In any situation, a downgrade in the lifestyle can be difficult for them.
To avoid such a situation, make sure that your family has enough financial cover for them to continue living comfortably. Therefore, when choosing the coverage, consider the cost of maintaining the daily lifestyle for your family. This will help your family get at least the basic necessities in your absence, if not everything.
- Assets and Liabilities:
As you grow through your earning years, there are some major expenditures along the way – a car, a house, etc.
These assets will turn into a liability for your family in your absence if the loan amount on the asset is yet to be repaid. When you decide on the term insurance plan amount, think about the loans that need to be repaid so that your family won’t be burdened with them.
You can make it a practice to either account for all the loans and other financial liabilities in a single term insurance plan or cover a significant loan (like a home loan) with separate term insurance. The payout from the term insurance plan will help the family repay the loan and live a debt-free life.
Riders are additions to the term insurance plan that enhance the coverage you get from the plan. Riders are useful for specific situations such as critical illnesses, accidental death and so on. So, if you have a family history of certain critical illnesses or you work in an accident-prone sector, it is imperative to enhance your term cover with relevant add-ons.
Once you buy an insurance plan, you will need to pay the premiums as per the payment schedule. However, ensure that you are able to pay the amount, as a failure in making a timely payment will lead to a lapse of your policy. Hence, whenever you buy a term insurance plan, make sure to use a term insurance calculator. The calculator will help you understand the approximate premium outflow, and you can adjust your term insurance cover to match your budget.
An adequate term insurance cover will take good care of your family’s financial needs, such as your children’s further education, their marriage, the purchase of a new home or car and so on. Carefully planning the amount of coverage and aligning it with your family’s expenses can help you protect them better.