Buying life insurance is important in today’s world where money controls everything. However, the purpose of a life insurance is not about you but it is about the people you love and care. Life insurance looks after your family’s financial needs in your absence. It is better to take measures today to protect yourself and your family.
A common misconception among people is that once they decide to buy a life insurance policy, they have secured their family’s future. However, this is not the case; buying life insurance is only 50% of the task. Choosing the correct life cover and then monitoring it with your lifestyle is also very important. A life insurance policy would serve no purpose to your beneficiaries if the life cover isn’t adequate for them. You must assess all the possible expenses that your family will encounter in the future in order to decide on the correct life cover.
You may also be interested in the 5 most common mistakes people make while buying term insurance.
Let’s look at the factors which decide your life cover;
This is the most important factor. After your demise, the life cover will be an income replacement for your family members and this money will be used for the daily household needs. The life cover must be large enough to provide your family with an amount equal to your income. As a rule of thumb your life cover should be 12 times your annual income.
Any outstanding loans that you have taken during the course of your lifetime will have to be
paid by your family in your absence. Hence, your life cover must be large enough to enable your family to pay off any outstanding debts, so that they are not burdened with a large liability with no resources to clear it off.
Learn more about how the easy availability of loans can ruin your life.
More the number of dependents, larger the required life cover. A greater number of dependents imply more expenses, more expenses imply need for more money. You must be extra careful if you have ill parents or a child with special needs.
- Future Expenses:
Every parent strives to ensure that their child is better than the rest. In such a scenario, education institutions and coaching classes charge an exorbitant amount. Moreover, sending your child overseas for higher education requires financial planning from the earliest. Or he/she may want to start up a business of his/her own, which again needs
capital. Your life cover should cover the future expenses of your family.
You can also look into the advantages of a child education plan.
With prices constantly increasing, make sure to account for inflation when you decide your life cover. A life cover of Rs. 10 lacs may appear big today, but at an inflation rate of 6%, your family would need a much bigger amount in the future.
All these are important factors when deciding your life cover. An inadequate life cover can prove to be a burden for your family in the future. Don’t let them suffer, take the correct amount of life cover and fulfill all your insurance needs. You can calculate your life cover here: https://www.edelweisstokio.in/total-secure-plus/buy