Time to re-think? Your Life insurance cover may not be sufficient for your family

Do you have a life insurance policy?

Do you remember the name of your plan?

Do you remember how much will be paid to your family incase anything were to happen to you (often called the Sum Assured amount)?

People often assume that buying any life insurance completes their responsibility towards their family. What they forget to gauge is the insurance cover amount - that is, how much will be paid to their loved ones, should anything happen to them. And will that amount be enough to support their family for a lifetime.

Eventualities can happen anytime and you have to make optimum arrangements for your family in case you are not there, and think how your family will fulfill their financial needs. Just like you insure your car for the right car value, and insure your shiny new phone for its actual worth, it is important to get sufficient life insurance to protect your family completely. A sufficient life insurance should be enough to support your family for entire life. It is generally calculated by estimating the total earnings of an individual through his lifetime. For ease of understanding and calculation, financial experts, as a rule of thumb recommend to have an insurance cover that is equal to 10 times of your annual income.

Hence, it is important for a breadwinner to understand and take sufficient life insurance cover in interest of his/her family.

As per experts, adequate insurance cover should be at least 10 times the annual income and has the potential to replace your future income. For instance, for a 28-year-old, earning an annual income of Rs 10 lakhs, a life insurance cover of Rs. 1 crore will make sense for a period of 30 years. You can also increase life insurance cover as your income will increase with time.

Although premiums written in Indian life insurance markets touched Rs 4.58 trillion in FY18, the figures are quite low as compared to countries like US, UK and Singapore. (Source:ibef.org,Nov, 2018)

Term insurance is the simplest form of life insurance that comes at an affordable cost and provides your dependents financial security in return. For example, , Max Life Online Term Plan Plus offers a term life insurance cover of Rs1 crore at just Rs 563 per month ^. Beyond this, you may also opt for additional benefits like coverage up to 40 life threatening illnesses and disabilitiesby opting for suitable rider(s) with a nominal additional premium payment that may be available with certain term insurance products. Term insurance plan guarantees protection in terms of sum assured for a fixed premium for a fixed period of time. You can also customize your policy and add riders to it as per your requirement.

The key here is to start early as the premiums paid towards a larger cover will be much lower at lower ages. At the same time, a low premium also should not be your focus and thinking about future expenditures, including inflation, loans, any debt, will help you determining the right cover.

1. Term plans are one of the most affordable forms of protecting the financial interest of your family.

Term insurance is cost-effective. An insurance cover of Rs 1 crore is available at around Rs.500-600 per month (Approximate figure for a 28-30 year old healthy male)

2. Term plans are customizable

You have flexibility to choose term/duration of the term insurance. You also have option to choose a specific sum assured. Not just this, you can also add additional benefits to base term plan like Accidental cover and Life Stage benefit. You may also choose to pay premium till 60 years and enjoy the benefit till coverage term.

For example, in Max Life Online Term Plan Plus (UIN: 104N092V03) you can add monthly and increasing monthly income, and other riders* as per your requirement. Through this plan, 0.4% of the Sum Assured is paid each month for 10 years as fixed monthly income. This amount is payable over and above the fixed base sum assured. Under the same policy, you get the choice of 3 death benefit options – Basic Life Cover, Basic + Monthly Income, Basic + Increasing Income.

3. Some term plans also cover you from major illnesses

A critical illness like cancer, heart attack or lung failure puts a major strain on your finances. It is important to cover your family from the financial impact of such illnesses. Some term insurance plans provide coverage against multiple critical illnesses and provide a lump-sum payout incase of an unfortunate event. For example, Max Life Online Term Plan Plus provides coverage against 40 critical illnesses* like heart attack, cancer, kidney failure etc.

4. Term insurance plans are also one of the best ways to safeguard your family against any liabilities like loans, debts, etc.

In case of an unfortunate event, loans and debts can be a huge setback to your family‘s finances. Hence, it is important to cover your family against liabilities arising out of such loans and debts.

5. Also, term plan insurance also comes with tax benefits^^.

You can avail tax benefit of upto Rs 1, 50,000 per annum under Section 80C of the Income Tax Act 1961. Also, the death benefit paid to the nominee (in case of unfortunate death) tax exempt under Section 10 (10D) of the income Tax Act 1961, as per prevailing tax laws.

Once you have decided to buy term insurance, it is advisable to compare the term plans available in the market. Some of the factors that you should keep in mind while comparing the term insurance plans are -Claims Paid Percentage, Monthly Premium, Solvency ratio of the company, Additional benefits/riders available with the plan, coverage term (longer the better), etc.

Remember, buy a term insurance plan that completes your financial plan and is not just a tick mark in your portfolio.

To calculate personalized premium for Max life Online Term Plan Plus, Click hereand to know complete benefits of the plan, Click here

^Standard Premium for a 28 year old, healthy, non-smoking male.

^^As per prevailing tax laws

*On Payment of additional Premium