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How much life insurance coverage would be ideal for you?
A crucial factor when deciding to buy life insurance policy is age, since people of different age groups have different set of responsibilities. Ideally, young individuals, say in the age group of 25-35, can go for higher coverage as currently they can pay higher premiums considering they don’t have many responsibilities.
How much Life insurance coverage would be ideal for you?
Photo : BCCL
New Delhi: Life insurance is an agreement between the insurer and the insured which covers the life of the latter. It offers financial aid in case of the death of the policyholder during the term of the policy, the beneficiary. This is why having a life cover is a must for every earning individual.
However, an important question that remains unanswered most of the time is – what would be the ideal amount of coverage for me? In the simplest terms, the answer to this lies with the individual itself. They are the one who are looking to get life cover so they must closely analyse their financial needs and wants.
As easy as it may sound, finding out the ideal coverage for self is not that easy a task. So, here are some factors that might help make the decision easier.
Factors that impact the right amount of Life Insurance:
Current Annual Income
Any individual looking to purchase a life insurance policy must first check their annual income. The thumb rule used while deciding the coverage is 10 times the annual income, however, do not forget about rising inflation rate, increase in standard of living. So, it would be better to have the coverage nearly 20 times your annual income.
Liabilities
Another key factor that comes into play which deciding the sum assured for your Life Insurance plan is liabilities. Since, life insurance guarantees financial aid to the family of the policyholder in case of their death, the coverage should be such that it helps the family members to pay off these debts and have an undisturbed life.
Financial goals
Any investment should be made keeping in mind the financial goals – new purchase, house, marriage, education etc. Since, the whole point of the life insurance policy is to secure the financial needs of the family after the demise of the policyholder, the coverage should at least cover the most important ex-penses like children’s education and marriage.
Age
A crucial factor when deciding to buy life cover is age since people of different ages have different re-sponsibilities. Ideally, young individuals, say in the age of 25-35, can go for higher coverage as currently they can pay higher premiums considering they don’t have many responsibilities.
As people age, their responsibilities, liabilities increase and so they can’t afford higher premiums and so they would have lower coverage amounts.
Moreover, anyone looking to purchase life insurance must be aware of what type and how much they need. Individuals can also use online calculators to help them pick the policy and the right coverage for them.
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