Is My Life Insurance Cover Sufficient?
Life Insurance is a great investment tool to help your family meet the financial crisis in your absence.
Life Insurance is a great investment tool to help your family meet the financial crisis in your absence. It can result in being one of the best financial decisions that you can make. There are many convincing reasons to invest in life insurance. Apart from providing financial security to your family, life insurance will provide for you in case of an accident, disability or a medical condition. The sudden demise of a family member is not something we think about, but in such situation, a life insurance cover can be an ideal lifesaver. However, not everyone fits into the same life insurance cover. It is essential to weigh whether your life insurance cover is sufficient for your needs. For someone to wear the best-fitted apparel, they need to provide the vital stats. In the absence of this, the final product can turn out to be shabby. Similarly, a tailored insurance cover gives you the best benefit without disturbing your financial plan.
If you are considering buying an insurance cover, you need to consider the below mentioned points.
- Know your ability to invest: You may want to invest in an extensive cover for the security of your family, but you need to understand your ability to invest. Consider your current financial position and keep the premium amount in mind when making an investment decision. You will have to pay the premium without default to continue with the policy. It is advisable to invest within your limits and to choose an amount which fits your monthly income.
- Evaluate the needs of your family: Your life insurance cover will provide for the financial needs of your family in your absence. You need to rationally evaluate the needs of your family and based on the same, choose a cover. Ensure that the cover is sufficient for the lifestyle and the monthly expenses that your family incurs. If the cover is not enough, it will still cause the financial crisis in your absence.
- Any financial obligations in the future: Based on the lifestyle of your family members and the expenses that you can foresee, you need to choose a cover. You need to consider major life decisions like higher education and marriage of your child when you choose to invest in a policy. You need to consider the rising costs of healthcare and education when choosing a policy. Ensure that are investing in a policy which will provide for all the financial needs of your family in the coming years.
- Calculate the monthly expenses: This is a crucial step for you to determine the amount of insurance you need to purchase. You can calculate the current monthly expenses of your family and determine the annual expenditure. Based on the final amount, you need to include financial obligations that may arise in the future and consider the impact of inflation on deciding on the amount of insurance you want.
- How much cash benefit you want: Finally, you need to consider the amount of cash benefit you want. Not every insurance policy comes with a cash benefit, but life insurance has a cash benefit you can avail of. It works differently depending on the type of policy you have. How cash value grows also depends on the policy type. You can withdraw money from the cash value of the policy. You need to consider your financial position when deciding on the cash benefit you want to have.
- Number of years you want to provide a cover for: When you buy a life insurance cover, you need to consider the number of years for which you want to provide financial security to your family. You can decide this by considering the age of your children and by when they could start earning. However, there is no other way to determine how long you will survive or when an unfortunate event will happen; you will have to do it on an assumption basis. Decide on the number of years and multiply the annual expenses with it, now you simply need to add the number of financial obligations you can foresee to reach the sum assured.
It is a tedious task to decide on the amount assured for a life insurance cover. Nevertheless, it is a onetime investment decision you make. Hence it makes sense to give it a good thought and take a well-informed decision. Choose from a list of life insurance policy plans suitable for your needs.