From financial experts to the elders of the house, everybody agrees that financial planning is very important in current times, especially after the Pandemic. The whole point of financial planning is to make sure your family is protected financially and a term life insurance plan is one such way through which you can protect your family financially. If you read about what is term insurance online, you will get to know it is a basic life insurance plan that provides a sum assured in the form of death benefit to your family after your demise provided the unfortunate demise happens in the policy term. However, have you ever thought the sum assured you selected when you first purchased the plan, will be enough to cover your family’s needs later on? What if the coverage amount falls short of your family’s needs? In this article, we will learn how to secure a higher sum that can protect your family’s future.
First, assess your needs accurately: The first step in ensuring you get adequate coverage for your family is considering several factors listed below:
Take into account your existing Savings and Investments: Compute the expected expenses you need to do in coming years. It could be the college fees you need to pay or expenses for your wedding, etc, List down the expected expenses and compute the amount. After that, subtract the value of your current savings, investments, and insurance policies from your overall financial liabilities. If your savings and investments come to around Rs. 10 Lakh, minus the total obligations. This will give you the remaining amount you need and hence, can be used as a reference amount for the sum assured.
Basic Living Expenses: Determine the monthly expenses necessary for your family’s survival after your unfortunate demise, such as housing, groceries, and medical care. If in 2024, the total expenses are Rs. 35,000 then add the inflation till the end of the term life insurance plan and you will get the sum assured you should consider.
Major Financial Goals: Consider major future expenses like children’s education, wedding, or purchasing a property.
Outstanding Liabilities: This includes any outstanding loans or debts, such as vehicle loans, or personal loans.
When you list down the aforementioned expenses on the paper, you will get the reference point for the sum assured you need to consider.
2. Check Your Eligibility: When you start to read what is term insurance, you will realize the insurance companies base your maximum term insurance coverage on features such as age, occupation, health, and existing policies. Your annual salary is an important aspect of this. If your yearly salary is ₹6,00,000, and the insurer offers coverage up to 15 times your income, the maximum eligible coverage is ₹90,00,000 (roughly).
3. Explore Riders: When researching what is term insurance, one cannot underestimate the fact that how riders play a huge role in getting the right coverage. Riders are additional policy features that can improve your coverage. Consider an Accidental Death Benefit Rider, which gives an additional payout in the event of accidental death. Assuming your base coverage is ₹1,00,00,000, you can add an accidental death rider for an additional ₹50,000. In the event of an accidental death, your family will receive a total of ₹1,500,000.
4. Create a Supplementary Corpus: In case you are not able to secure the coverage you computed via the aforementioned ways, you can consider establishing a supplementary financial safety net through investments or savings. It will fill up the gap in your insurance coverage.
5. Use Increasing Coverage Features: One useful technique is to select a term life insurance with increased coverage features. These policies automatically increase the sum assured at regular intervals throughout the policy term, ensuring that your coverage stays up with inflation and rising financial obligations. For example, coverage starts at ₹50,00,000 and grows by 5% per year. After ten years, your coverage will be around ₹82,29,526.
6. Professional guidance:
Consulting a financial or insurance professional can be extremely beneficial. They can assist you in navigating complex policies, understanding your individual requirements, and finding the best coverage for your family.
Important Aspects Before Choosing the Plan
Read about the Inclusions And Exclusions Of The Selected Term Plan: Before purchasing term insurance, it is important to understand how it works and what it covers. When choosing a term plan, compare many insurers based on the premium for the sum assured and the protection they provide against it. To avoid such misconceptions and claim refusals, it is critical to completely comprehend the life insurance plan’s coverage and exclusions.
Medical Procedure and Proposal Form: Every insurance company has a series of questions about your health, occupation, and way of life. It is critical that you provide precise answers since they will determine whether you are eligible for a telemedicine appointment or a conventional physical examination. In terms of your claims process, each of these medical records (that you’ve undergone) is equally crucial.
So we are saying,
Term life insurance plan insurance provides a safety net by replacing your income and addressing financial responsibilities after your unfortunate demise. It protects your family’s financial stability, allowing them to keep their current lifestyle, pay off debts, and realize their ambitions. Hence, enough coverage is required. Obtaining coverage that exceeds your eligibility may appear difficult, but with careful planning, you may secure a comprehensive term life insurance plan that protects your family’s future. Remember that it is not just about the amount of coverage; it is also about ensuring that your loved ones are well cared for, no matter what life throws at them.