Adding value to the ‘Sabse Pehle Life Insurance’ campaign, buying a life insurance policy is quite simple these days, and many people are opting to buy the plans online. However, some basic mistakes must be avoided when buying life insurance. It begins with choosing the appropriate sum assured amount.
Why The Sum Assured In Life Insurance Matters
Firstly, what is the sum assured in life insurance policy? It is a sum of money that the insured or their family receives on the maturity of the policy (in case of endowment plan) or upon the premature demise of the insured (in case of term insurance plan).
Many people plan to go for a sum assured less than Rs 50 lakhs! There could be one main reason for it, which is they think their premium amount would be too high. It is reasonable to expect that the higher the sum assured, the higher is the premium.
But while you may think you have selected the right amount of sum assured, below are a few reasons why you need to opt for a higher sum assured in your insurance policy:
Reason 1: Inflation
Prices have increased tremendously. It’s not just luxury goods, but also necessities like food and travel have increased tremendously in cost in the past 5 years. Imagine the inflation rate after 10 or 20 years. While you may be under the assumption that a sum assured of 40 or 50 lakhs will be sufficient for your family, it may or it may not. And if it doesn’t your family members will have to compromise on their standard of living.
Reason 2: Cover your loan amount
You might have calculated your family’s daily expenses, child’s education costs, etc. But, what about repayment of loan or EMIs? If you have taken a personal loan or a home loan, it is recommended that you opt for a sum assured that is sufficient enough to cover the outstanding amount. So that your family members are financially stable if any unfortunate event occurs to you and the loans are still unpaid when you are absent.
Reason 3: Discounts for higher sum assured
Many have this misconception that opting for a high sum assured will lead to a high premium amount. But the truth is that a higher sum assured up to Rs 1 crore is affordable and not very expensive when you take a term insurance plan. You wouldn’t want your family to compromise just because you would have to add some extra amount to your premium at the current moment!