What Should be Your Ideal Term Insurance Sum Assured?

Purchasing a term plan is a simple method to provide financial security for your loved ones. The need for robust term insurance policies is emphasised even more in present COVID-19 times, as more people realise the value of assured returns and life insurance to deal with challenges. Aside from picking the right term insurance plan, having enough coverage is essential. The entire notion of term insurance is nullified without the appropriate sum assured. So, continue reading to avoid making the mistake of choosing an insufficient term insurance coverage amount.

 What Should be Your Ideal Term Insurance Sum Assured?

Choosing the amount of insurance coverage you'll need isn't as difficult as you might think. You can consider the following factors.

• Financial Liabilities

A vital issue to consider when determining the sum assured of your term insurance policy is your financial responsibilities, such as existing loans and debts. Your family may struggle to manage EMIs and home bills if you die prematurely, mainly if you were the primary breadwinner. Therefore, be sure your coverage is sufficient to cover all of your current liabilities. 

• Future Goals

Your financial objectives also play a significant part in determining your insurance coverage. The goal of insurance is to help your family preserve the lifestyle you've worked so hard to create for them in the case of your untimely death. This entails achieving financial goals such as your children's education and marriage, all of which necessitate a significant financial investment. Hence, it would be best if you accounted for these potential liabilities in the future while also taking inflation into account.

• Current Income

Your current annual income is an important aspect to consider when determining your term insurance policy. While it used to be a rule of thumb to get life insurance 10 times your annual income, severe inflation and rising living costs now require you to choose at least 20 times your yearly income. 

• Age

The age at which you purchase your policy is also significant, as different life stages have distinct needs. This necessitates checking a life insurance policy regularly. Consider how many years you expect to be able to support yourself. As a term life insurance policy can also replace income, you should consider when you want to retire. It will assist you in determining an appropriate level of coverage and sum assured premium. 

• Policy Duration

It is crucial to consider the policy duration carefully while deciding on the coverage. The insurance coverage that ends when you turn 50 might not turn out to be all that good. So, if you want to retire early, you can invest in a term plan with a Return of Premium option. This way, you will have insurance until you hit retirement age. Then you will be able to take advantage of maturity benefits to enjoy financial freedom during your retirement years. 

Take Away

It would be best to buy a suitable term insurance policy when you are younger and healthier to get higher coverage for the longest possible period. Moreover, inadequate term insurance can put you and your dear ones in a financial bind. So, before you buy a term insurance policy, make sure you carefully consider all of its aspects and how they connect to your life.

Also Read:

What Shall be the Suitable Policy Term of Your Term Insurance?

What Are Term Insurance Tax Benefits?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.