Calculate Right Term Insurance Cover

When buying a term insurance plan, one of the most important factors while deciding the right plan is choosing an adequate life cover. While term insurance coverage may vary from person to person based on their income, financial goals, family needs, and lifestyle it is important to understand how you can decide on the accurate coverage for you.

Usually the thumb rule is to opt for coverage which is 15 to 20 times of your annual income. Please note that term cover is not to be chosen based on the present income only; it may depend on the family's future needs, your liabilities, loans, inflation and the number of dependents that you have.

How Does Term Insurance Coverage Work?

Let's take a look at an example to understand how term insurance coverage works for a policyholder:

For instance,

Factors to Consider While Calculation your Term Insurance Cover

Take into consideration the future needs and goals that you've decided for your family to calculate how much term insurance you need. It includes the standard of living, kids' higher education, building a house, loans and debts, etc.

Here, we've listed all the important factors to consider while calculating the term insurance coverage:

1. Estimate Your Monthly Expenses

   Take into account all your expenses while calculating the adequate life cover. For example, Bhanu's monthly expenses are Rs. 40,000, which is estimated to be around Rs. 4,80,000 of the annual income. It is advisable to get coverage of up to 15 to 20 times of the annual income so that the monthly expenses are met seamlessly.

2. Analyze Your Financial Liabilities

   Are you scared to pass your liabilities, such as home loans, car loans, business-related loans, etc., on to your family? In that case, you should choose the coverage which can be used to pay off these debts or consider buying a decreasing term plan which will pay your loan using the premiums.

3. Consider your Family's Future Goals

   The main objective of buying a term plan is to help your family maintain their living standard when you're not around. Having a backup is necessary as it may help your family to build your unfulfilled dreams, such as building a house, caring for aging parents, paying for the wedding of your children or their higher education.

4. Term Insurance Policy Period

   Every individual passes through a different stage of life when the needs and responsibilities change. For instance, at the age of 30, Bhanu is unmarried with few responsibilities, so the policy tenure till the age of 60 years will be enough. But at the age of 40, Bhanu gets married and has one kid, and then he'll need a term plan with coverage for your entire life till 99/100 years of age.

5. Age

   Age is an important factor in estimating the right term insurance plan coverage for your family. For a young policyholder, a term life cover of up to 1 crore will be adequate to fulfill their financial needs such as home loans, aging parents' care, car loans, Etc. Meanwhile, for an older policyholder who is married with kids, a 1 crore term life cover may not be enough to fulfill their financial requirements. It is always advisable to buy a term plan at an early stage of life because the premium is cheaper when you're younger and healthier.

Factors to Consider While Calculation your Term Insurance Cover

Take into consideration the future needs and goals that you've decided for your family to calculate how much term insurance you need. It includes the standard of living, kids' higher education, building a house, loans and debts, etc.

Here, we've listed all the important factors to consider while calculating the term insurance coverage:

Conclusion

Do you wish to calculate how much term insurance do I need? We've listed all the factors to consider and methods to calculate the adequate term insurance cover. For further assistance, you can even reach out to our insurance expert team at PolicyX.

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