4.6 C
London
HomeFinanceThe Importance of Having a Term Cover 10-15 Times Your Annual Pay

The Importance of Having a Term Cover 10-15 Times Your Annual Pay

A term insurance policy is a simple and affordable form of life insurance that provides financial coverage to the family of the policyholder in the event of their death. The policyholder only needs to pay a fixed premium, and if they die during the policy term, their nominee(s) will receive a fixed amount of money to help them maintain their financial stability.
 
It is recommended to buy term insurance as soon as you start earning, especially if you have family members who depend on your income. For example, if your parents rely on your income, it is important to purchase a term plan early on. If your parents have their own independent income, you may consider buying term insurance after marriage, as your spouse may become dependent on your income. Having sufficient coverage is crucial to ensure the well-being of your loved ones in case of any unfortunate event.
 
When determining the ideal term insurance cover, calculate your post-tax income and consider your financial contributions to your family, including inflation, income appreciation, and various financial goals and needs. It is important to get a term cover that replaces your financial contribution to your family in the event of your death. The duration of the term plan should align with the age you plan to retire or stop earning through work. After calculating the required coverage and duration, compare premiums from top insurers and choose the one with the lowest premium, without any additional riders.
 
When purchasing term insurance, consider factors such as one-time expenses like child education and marriage, outstanding loans, retirement planning for your spouse, medical emergencies, and daily expenses. A general rule of thumb is to have a term cover 10-15 times your annual income. It is important to review your protection requirements annually and after major life milestones to ensure adequate coverage.
 
The best age to get a term plan is when you are in the middle of your career and have liabilities to pay. It is advisable to purchase a term insurance plan as early as possible to lock in the highest coverage at minimum prices. Different types of term plans include regular term plans, term return of premium (TROP) plans, return of premium at no cost plans, and independent term homemaker plans.
 
When choosing the right term plan, compare multiple plans from different companies and consider the insurance company’s claim settlement ratio. Some popular plans in the market include HDFC Life, ICICI Prudential, Max Life, TATA AIA Life, Aditya Birla Life Insurance, and PNB MetLife, all of which have a high claims settlement ratio.

Explore More

LEAVE A REPLY

Please enter your comment!
Please enter your name here