Term life insurance is mandatory insurance to be availed by every breadwinner of the family. Every individual will have 2 risks in life which are Living Longer & Early death.
A. Living longer is also a risk as your investment needs to fund you for the long years without depending on others.
B. Early death will have a huge financial burden on the dependents and family and if the demised person has taken loans, then it is even more difficult for the family as the debt needs to be paid at the earliest to have a stake in the property.
Usually, Life insurance companies provide a maximum cover of 20 times of gross annual income of the insured person and for self-employed businessmen, the life cover will be determined based on their Income Tax returns.
There are 2 major ways in which term insurance coverage amounts to be ascertained.
1. Income replacement option: In this method, assuming a person is retiring at the age of 60, he should consider life insurance to the extent of his post-tax salary which he might have received if he worked till retirement with a salary growth rate each year at the inflation rate. What this does is, his financial liabilities will be fulfilled even if he is no more and the family will not suffer financially in his absence. (Though emotional loss cannot be avoided)
2. Need-based option: Assuming the breadwinner of the family has dependents including housewife, dependent children and others (parents), then he should consider the total income required in his absence and he should also consider the future inflation of educational expenses of his children to plan a suitable sum insured and living expenses of the dependents.
To know what is term insurance cover you require to protect your family & dependents, do reach out to me. I am more than glad to help you to choose the right plan.
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