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Like many other rare expenditures, life insurance is a must-have not for yourself, but to protect your family in your absence. Isn’t that a constant fear with us? Insuring our life is important for those we love and care for. Most life insurance products aim at keeping and maintaining the current lifestyle as it previously was before the breadwinner passed away. Pre-planning therefore is the key. For the dependent’s protection, you need to know how much insurance do I need to begin with? In case you hold a policy, it is imperative to know whether you are under or over-insured.
Many a times, insurance agents, financial advisors and a few online sites tend to recommend you to follow the thumb rule, whereby the life insurance cover will be a mere calculation of around 5- 6 -10 times your annual income. But, you must not fall prey to this generalisation. The logic behind this is that every individual has different needs, varying backgrounds and unique obligations.
There are many other factors at play that needs to be considered before zeroing in on the amount of life cover. You need to start with knowing your current worth and periodical expenses. Add to this, the future obligations of children’s education, marriage, retirement requirements and outstanding liabilities like home loans, car loans etc. that need to be factored in. Then, finally based on the number of dependents, remaining number of working years along with your annual income, the cover could be calculated in a more logical manner. Broadly, most of us would want enough life insurance to ensure the family continues with their existing lifestyle despite an unforeseen death of the insurer
Post a clear understanding of calculation of the cover, one needs to compare a myriad of companies that offer life insurance products. You could get in touch with the agents directly or better still, check online sites that compare the premiums. For calculation of cover, you can visit our site easypolicy.com. Let us take an example of a 30 year old married male who wants a Term plan for a duration of 30 years with a sum Assured of 50 lakh rupees. With a few rider benefits that could vary from Policy to policy, an individual is likely to pay a Premium of anywhere between 4606 rupees to 18,989 rupees depending on the company he selects. The Insurer should always read the brochure very carefully to understand the pros and cons of every policy in comparison with the other.
So it’s time to revisit your life insurance policy to know if one has enough. In India, the insurance penetration was a tad over 5% in 2010, which implies only 1 out of 20 people are insured. A figure that comfortably concludes the majority still needs to be aware of the risks involved in our fast changing surroundings and consider buying a policy. Moreover, the average insurance policy in India offers a cover of little over one lakh rupees. Would the amount be sufficient for your family when you are not around is a question that requires serious thinking.
The Risk of underestimating future expenses and ignoring liabilities can lead to under insurance. More often than not, customers are unaware of being under Insured and live in a mirage of a secured future for their family. Thus, it is critical to take into account the unforeseen and the unexpected in life. Also, possession of a term policy is not again because you need to check whether you have outlived the time span already. Then, buying another term policy later in life may not be a great idea with a higher amount of premium. On the other side, if you are paying more than what is required in your case, it’s a mere waste. The same amount can be invested in more lucrative propositions that could provide higher returns.
Life insurance is thus an instrument that reduces or eliminates the risk in uncertain times and provides certainty to your loved ones. And the cost of insurance is negligible compared to the risk of leaving your family with a sudden void of future money flow.