Are you confused about the amount you need to invest in a term insurance plan? While choosing insurance policies, determining the right amount based on your financial objectives might be a challenging bet. So, it is best to buy an insurance policy that’s a minimum of 11 to 12 times your annual income. Say, for instance, you earn Rs. 5,00,000 annually. In that case, your insurance coverage should offer at least Rs. 60 lakhs.
This amount is enough to meet your future requirements. But as a newbie in this insurance world, how about some additional tips and tweaks? If you are unsure about the amount you need, this post gives a fair idea. Decide on the right policy amount by assessing the following parameters.
Key Parameters to Evaluate the Best Term Policy Amount
Look for a term plan by assessing these parameters for the best policy amount:
Evaluate Your Monthly Costs
It is imperative to determine your monthly expenses before you determine the life coverage. That may include water bills, electricity, rents, clothing, grocery bills, and other costs.
Say, you have expenses related to your parents, children, spouse, and other costs. Your coverage would be, depending on the household expenditure, one crore if it’s 15 times more than the salary. So, before you invest in the term plan, always evaluate the monthly costs.
Do You Have Financial Liabilities?
Financial liabilities like credit card payments, home loans, and other loans may fall on your spouse or child’s shoulders after your unfortunate demise. You can eliminate this financial hassle from your family’s shoulders by investing in a term plan. Consider the one that comes with larger coverage. These plans can fulfil your present financial liabilities.
Learn More About the Premiums
The last thing you ever want to experience is missing your premium payments because of fund shortage. So, it is wise to buy a policy that suits your budget. The best way to choose one is by comparing the premiums offered by insurers. You may also use a term insurance calculator to measure the amount.
Consider Your Future Financial Objectives
The prime reason why you should purchase a term policy is because you want to help your family members in case of your sudden death. It’s like a financial backup that assists your family in accomplishing their future goals, like your child’s higher education abroad or marriage.
It also lets your family member or spouse pay the unexpected medical bills. Invest in a policy that can support your family during the most unfavourable circumstances of life.
Determine Your Age
Age isn’t just a number; it’s a significant parameter that determines the term plan coverage for your family. If you are a young working individual, you may get coverage of up to Rs. 1 crore for financial responsibilities like home loans, education loans, etc. So, it is imperative to buy a plan at an early age to get maximum benefits.
Consider the Tenure for the Term Policy
You may have various financial responsibilities on your shoulders at different stages of life. While at 23, you may need to fulfil your dreams, at 40, you need to take care of your kids and the entire family. Thus, buying a term plan with maximum coverage for your family is an excellent decision.
The Final Words
A life insurance policy is the best investment to safeguard your family’s future financially. So, if you plan to buy the policy online, determine the aforementioned factors before choosing the insurance plan.