How Much Term Insurance Cover Do You Need?
Term insurance is a crucial financial tool that provides security for your family in case of an unfortunate event. But how much cover is enough? The right coverage amount depends on various factors, such as your income, liabilities, future responsibilities, and inflation. In this guide, we will estimate the ideal term insurance coverage based on five income categories while considering important financial commitments like supporting a spouse, elderly parents, children’s education, healthcare, and home loan EMIs. We will also provide estimated yearly premiums and highlight common mistakes to avoid while purchasing term insurance.
Before diving into the recommended coverage for each income category, let’s understand the key factors influencing the required sum assured:
If you have significant debts like a home loan, car loan, or business loan, you should increase your coverage accordingly. For example:
Many people make costly mistakes when purchasing term insurance. Here’s what you should watch out for:
Many people underestimate their financial needs and buy a lower sum assured. Always consider inflation, lifestyle expenses, and future liabilities before deciding on a coverage amount.
Riders such as critical illness cover, accidental death benefits, and waiver of premium can significantly enhance your policy. Don’t ignore these add-ons if they fit your needs.
Hiding pre-existing diseases or lifestyle habits like smoking or drinking can lead to claim rejection. Always provide accurate information to avoid disputes later.
Term insurance should ideally cover you until your retirement (60-65 years). Avoid choosing a shorter policy tenure that expires too soon.
Always check the insurer’s claim settlement ratio (CSR). A higher CSR (above 95%) indicates a better track record of claim approvals.
Buying term insurance at a younger age (in your 20s or early 30s) ensures lower premiums. Delaying the purchase increases your premium costs significantly.
Don’t buy the first policy you come across. Compare different plans, coverage benefits, and premiums before making a decision.
Term insurance is a vital safeguard for your family’s future. The coverage amount should be sufficient to sustain your family for at least 10 years while covering liabilities and future expenses. By considering your income, inflation, and financial responsibilities, you can make an informed decision.
Before purchasing, avoid common mistakes like choosing insufficient coverage, ignoring riders, or failing to disclose medical history. Investing in a well-researched term plan ensures financial security and peace of mind for you and your loved ones.
Disclaimer: The recommended coverage is based on certain assumptions such as home loan or personal loan EMIs, and financial responsibilities. Individual needs may vary, and it is advisable to consult a certified financial advisor before making a final decision.
Do you have the right term insurance coverage? If not, now is the time to act!
