Buying a term life insurance? Here's how to calculate how much life cover you need
New Delhi: The importance of investing in life insurance cannot be stressed enough. Life insurance is designed to offer financial safeguards against the death of the policyholder and also works as a good investment plan, which helps you meet several life goals in turn.
Naval Goel, CEO & Founder of PolicyX.com said: "The life insurance coverage depends upon a few factors such as your current annual income, financial future liabilities, financial goals, your age at the time of purchase, and several other responsibilities that you have."
However, before researching or purchasing a term plan, it is imperative to evaluate what you actually want to accomplish with the policy. Not to forget, life insurance is an essential financial product to buy and you would never want to goof up while making a decision.
Calculating the Right Sum Assured
How much term life insurance do I need? remains the most common question of almost every person who plans to buy a term life insurance policy.
Santosh Agarwal, CBO-Life Insurance, Policybazaar.com said: "One basic rule of thumb is that the death benefit on your policy should be equal to seven to 15 – 20 times the amount of your annual salary. But, like any rule of thumb, that isn't always particularly accurate. It is important that you do always make sure to ask your insurer about what assets and obligations the insurer plans to consider for reaching the recommended amount."
While you are investing in an insurance policy, never get driven by everything and anything that the insurer says, rather make sure the reasoning the insurer is giving makes sense to you.
Another way of calculating the sum assured is that you need is to figure out what income you want to provide for your spouse or other beneficiaries when you are not around to take care of them.
Term life insurance gives you different options to receive the total sum assured. Apart from the regular lump sum payout plan, the beneficiary can opt for a staggered payout plan and customise the plan as per specific needs and requirements.