How Much Term Life Insurance Cover Do You Need?

How Much Term Life Insurance Cover Do You Need?

   Now that you decided that you want to be covered with life insurance (in this case, term life insurance), the next thing you must decide on would be how much coverage you want. Would you want to have 

level term insurance (where the coverage remains the same all throughout), 

decreasing term insurance (where coverage decreases over time) or 

increasing or indexed term insurance (where coverage increases based on a specified rate)? 

    Your ideal coverage amount will be based on several factors: 

• Who is dependent on your income?

    Who will suffer financial loss in the event of your death (and the eventual loss of your income)? The more dependents you have, the more cover you should get. Please note that “income” is not just only applicable for those who are working. You should also take into consideration the “income” of stay-at-home parents. This income is roughly equal to what the family will have to spend if the stay-at-home parent were to pass away – this will include fees paid for a housekeeper or for child care, if that parent is taking care of children at home. 

• How much does your family need per year to live a reasonable lifestyle?

   You should take into consideration food expenses, utilities, communications and transportation expenses. The coverage amount should be sufficient to cover for your lost income. 

• How long will your family need this cover?

     When your children are grown up and financially independent, insurance is not that necessary so if your children are young at the time you purchase this policy, you need to be prepared for a considerable amount since their financial independence is still a long way off. 

• How much do you have in debt?

    How much do you have to pay in credit card debts and your mortgage? You should allot for these amounts in your coverage. 

    As a general rule, you should get at least eight to ten times of your annual salary as your coverage. This will allow a sufficient amount to pay for a portion or all of your mortgage debt and still have room left over for the family’s monthly household expenses.

     If you are looking to buy a term life insurance policy through the internet, there are also online calculators to help you compute just how much cover you will need.

Anand Khemka
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+91-82870413411