We all know how important it is to have life insurance to meet with our needs of financial security and safety in uncertain times. While the importance of life insurance Policy is obviously stated, the question with regard to insurance cover remains – ‘how much life insurance cover do I need’?
As days turn into months and months into years, it becomes imperative to know exactly how much life insurance cover you would need under changing times, especially in the light of your own unique circumstances. What is the Maturity amount that would leave you and your family at peace? What kind of insurance cover would be good enough to make your insurance policy look smart and attractive?
There are few factors that need to be given due consideration before you could calculate the maturity amount that would justify your investment in a life insurance policy of your choice.
Who are Your Dependents: The fact of the matter is that life insurance is all about dependents – you would want the life and future of your dependents to be taken care of when the unexpected happens. When you start off with the question, ‘how much insurance cover do I need’, you should think about your dependents. How old your dependents are and what their unique circumstances may be, are some of the questions you need to think of as you decide on the maturity amount.
Lifestyle of Dependents – current and future: While it is important to consider your dependents and their circumstances, it becomes imperative that you determine the kind of lifestyle that they should lead, or continue to live with the standards that they are already used to. It could be your spouse, who may have to get into the habit of working harder to compensate for financial changes, or it could be the kids who have the right to continue with their current educational standards from the right institutions – life insurance is a reflection of all of these factors.
What are Your Assets: When you determine the maturity amount associated with your insurance cover, you cannot just go by what your friend or neighbor has chosen for his or her own unique circumstances. What are the strengths of your assets? Are you deep down in your liabilities? Are your assets strong enough to bail you out of surprises? If you are high on assets and low on liabilities, your life insurance could provide you with a proportionately lighter insurance cover, and vice versa. This has to be considered along with the other factors involved in determining the insurance cover that you need.
Change in Income: As you would expect, your household income would not be the same in your absence. Under such conditions, considering the circumstances surrounding your dependents and in light of your assets and liabilities, you should also take the rate of Inflation into account to see the kind of future income your family would need. After all, the idea behind your choice of insurance cover is to ensure that lifestyle and income does not change well into the future.
It is a combination of all these factors that go on to determine the kind of life insurance policy that you should choose, the maturity amount that should make sense for you, and the insurance cover that would give you peace of mind. Life insurance is a combination of all such factors that go on to make a complete package, telling you how much life insurance cover you would need.