The primary purpose of investing in a life insurance term plan is to safeguard the financial future of your loved ones against the uncertainties of life. Factors like stress, poor eating habits, and an unhealthy lifestyle have made life uncertain, and you do not know what the future holds. Therefore, it becomes advisable to invest in term insurance as soon as possible. Provide the much-needed monetary security to your family members.
You can buy term insurance online or offline. Purchasing it online will ensure that you get a policy at a lower premium compared to the traditional method of buying from an insurance agent. While investing in a term policy, it is essential to opt for a high sum assured for a long tenure, at least until you retire.
The high sum assured can help your family to cover all the household costs and medical expenses. Also, they can achieve different life goals, like sponsoring children’s education and their wedding. However, these milestones vary during different phases of life. So, you need to understand how to determine the right sum assured.
To ascertain the suitable sum assured as per your life stage, you need to review your financial goals at regular intervals and adjust your life cover accordingly. For instance, when you bought a term policy, you may not have considered purchasing a new house. However, in the future, if you buy a home by taking a loan, you need to modify your life cover value. Remember that the sum of your debts should be lower than your sum assured.
Reasons to re-evaluate your term plan cover every financial year
If you are the sole breadwinner of the household and something untoward leads to your absence, your family will stop receiving any income. Therefore, a term plan shields the monetary well-being of your family members. You cannot make a mistake here, as their financial security depends on the life cover value.
You can consider the Human Life Value to finalize the appropriate sum assured. Additionally, you need to take inflation into account. With time, the cost of living will increase. Moreover, the expenses related to children’s education and their wedding as well as medical costs will rise. So, you must analyze if your term plan’s life cover value is sufficient to fulfill the family’s financial needs. Do not just grossly calculate your family’s future monetary requirements. Consider all these factors and then carefully ascertain your life cover.
By reviewing your policy and aligning the life cover with your family’s changing needs, you can provide them with the necessary financial stability. It indicates that you are not putting the economic future of your dear ones in jeopardy.
Things to consider while re-evaluating the life cover
Firstly, you need to assess whether the sum assured is enough as per your family’s needs and goals. Here, you need to consider aspects, like your age, current earnings, expected hike in the income during the future, current assets, and liabilities. The basic thumb rule that you can follow here. That the sum assured should be at least 15-20 times your annual income.
While revising the life cover you also need to account for the medical conditions of your parents and other family members. If you have old parents or any other family member suffering from any health problem. You need to think about how they will cope with the medical expenses when you are not there to take care of them. For example, if someone in your family is suffering from any long-term critical ailment. Make sure that the life cover value is adequate to meet the estimated treatment-related expenses during your absence. Ensure that you consider the cost of inflation here as well. A critical illness in the family can wipe away your life savings in no time.
If you do not want your dear ones to face any financial strain when you are absent, ensure that you readjust the sum assured life insurance term plan as per their changing aspirations and priorities.