New Delhi: An insurance cover provides a safety net to our unpredictable lives. Most of us need an assurance that our family members will be taken care of in the event something were to happen to us. As a parent, nothing could be more important to you than your child’s safety. Similarly, you would want to ensure family do not struggle in your absence, or because you suffered a permanent disability. This makes buying life insurance cover one of the most wise financial decisions we ever make. An insurance cover is more than just a source of income; it’s an assurance that you cared.
But how do we decide how much amount would be a good policy cover? Many people struggle with this question and often end up feeling that their policy could prove inadequate. That’s because they have not considered the future against most of the possibilities. Here are a few tips that will help you in deciding the right coverage.
1) Annual Income
Financial experts say you can determine this amount by taking into account your current annual income. They advise a coverage that is at least 10 times the annual income. However, you can pick a plan that is 20 times your current annual income if you consider the rising inflation, cost of living, education and other healthcare facilities.
Find out how much liability you have in terms of the vehicle or home loan. Include that as expenditure your family will have to manage and then decide on insurance coverage. Remember – your goal is to make the life of your family easier.
3) Financial Goals
It’s not just your current responsibilities but the ones you might have to fulfil in future that determine your insurance cover. You need to ensure a good amount is available for the higher education of your children. What about their healthcare needs? This will also have to be factored in as the cost of medical care is rising each day.
One of the most important factors determining the right coverage would be your age. If you are aged between 25-35 years, pick a cover that’s 20 times your annual income plus your liabilities. If you are in your late 40s, pick a cover that’s ten times your annual income plus your debt.
5) Policy Tenure
You have to pay an annual premium for the insurance cover you buy. Therefore, get one when you are young so that you get coverage for a long time for the same investment. Life insurance bought at a young age also results in cheap premiums.