The hectic life, unhealthy eating habits, and improper lifestyle of the people take a toll on their health and wellness. Life is uncertain, and as you do not know what the future holds for you, it is advisable to be cautious and plan for your family’s monetary well-being.
The uncertainties due to the Coronavirus (COVID-19) pandemic have made people realize the importance of securing their life. The ever-increasing medical cost and inflation is a concern for many people because of the mounting expenses and shortage of funds. Buying an insurance plan is one of the best ways to safeguard the family’s economic future, especially when you are no longer around.
Out of the different types of life insurance plans available in the market, a term insurance plan is considered one of the best options. If you are wondering about the term insurance meaning, then read on to learn about it.
Term insurance is a pure protection policy that provides only life coverage for a specific tenure. One of the biggest advantages of purchasing a term insurance policy is that it offers a high sum assured at a reasonable premium. It is essential to invest in a suitable term policy. However, the sum assured is the most crucial aspect before finalizing a term insurance plan.
Things to keep in mind while selecting the sum assured
Here are a few essential factors that you should consider before deciding the sum assured.
- Retirement age
You are buying a term insurance plan to secure your loved ones’ future and not for the sake of investing in a tax-saving instrument. Therefore, it is important to opt for the correct sum assured for your family’s daily expenses and help them achieve their financial aspirations. Ascertaining your retirement age is a vital factor that can enable you in choosing the ideal sum assured. Doing this will let you assess your income and you can find out the amount that you can spare to pay the premiums of your term plan.
- Day-to-day costs
It is necessary to ascertain your everyday expenditures your family’s long-term monetary objectives to determine the right sum assured. Therefore, you need to list out all your household expenses and other costs. Make a note of your utility bill, property tax, maintenance charges of your house, grocery expenses, medical costs, etc. Besides this, maintain a record of all your investments and debts. It will give you a fair idea of how much money your family will need to lead a peaceful life during your absence. Moreover, you need to consider the inflation aspect while selecting the sum assured is inflation. Ideally, the sum assured should be approximately 15 to 20 times your annual income.
- Life goals
You need to consider critical milestones in life, such as your children’s education and their wedding, or any other long-term ambition that will require monetary aid. Calculate such expenses considering the future inflation to select the accurate sum assured that can help you accomplish these goals.
- Assets and liabilities
It would be best to analyze all your assets and liabilities before choosing the sum assured for your term plan. Consider your assets like properties, jewelry, investments, and savings, as well as liabilities, such as personal loan, car loan, and house loan, among others to calculate your net worth. You need to assess your financial position properly so that you can select an adequate sum assured for your family when you are not there to take care of them.
If you do not want your family to deal with financial hardships if anything unfortunate happens with you, securing their future with a term insurance policy that offers a large sum assured is the need of the hour.
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