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A guide to calculating how much term life insurance to buy

A guide to calculating how much term life insurance to buy

| @indiablooms | 18 Oct 2019, 06:29 am

In our younger years, we did not quite have to think about death as a factor — something which could affect our lives manifolds. However, with responsibilities weighing on our shoulders, it is imperative for us to think of such factors and come up with a backup plan for the worst.

The best backup plan that you could ever have is providing a solid financial backup to your family in the form of a term insurance plan. Here, we have a guide to address your question of ‘how much term life insurance should I buy’, so that you find it easier to work around the whole insurance scheme.

Factors to consider while calculating term insurance

Before you actually start wondering ‘how much term life insurance I should buy’, you must consider the various factors that come to play around it — these factors help with shaping up your plan and policy. Here are some of the benefits that you would want to have with a term insurance plan.

1. A hassle-free policy

If you are looking for a nice and effective policy, then you should consider a plan which offers single premium options to offer your family a single lumpsum amount post your death. Generally, the sum assured in the policy should be 15-20 times that of the current annual income.

2. A cover for accident

If you want to get more than just a policy — something which takes care of other forms of emergencies such as accidents — then you must consider the accidental death benefits in term insurance policies. Accidental cover plans on your term insurance policy add a large number of benefits at added costs that protect you against unfortunate road accidents.

3. Protection against critical illness

Health insurance policies mostly cover the hospitalisation expenses, and might not compensate for critical illnesses that you might have been diagnosed with. If your family and you have had a history of critical illnesses, then you might want to get a critical illness rider with your term plan to make the best out of the insurance policy and cover those extra costs.

4. Choosing when to receive the payout

It is obvious: the fact that if you end up squandering your lump sum amount, it may have disastrous financial implications. Thus, it is important to choose a payout plan for your term insurance policy that fits your expenditure schemes well. Policyholders have the option to opt for multiple payment policies, such as fixed or increasing monthly payments, or just the lump sum amount. With a custom payout option, you get the flexibility of having the payout money at your command — using it only when you need it the most.

Calculating premiums with a term insurance calculator

A term insurance calculator can just address your question of ‘how much term life insurance I should buy’.

The steps to it are simple: choose the sum assured, select the period of cover, and select the premium payment term. Following these steps, you get details on your premium amounts and how much money will you be getting after the policy matures.

Once you have a better idea of how much you will be paying on the policy, it will be much easier for you to go ahead with a particular plan.

Conclusion

Term insurance plans not only offer a lump sum benefit to your dependents but can also offer monthly income to look after their regular expenses. This is an option you can select while buying the plan. This feature takes the burden of investing the large sum of money from your already stressed family members and provides them with financial support when they need it most.

With all the added benefits, you are not bound to buying a standalone term insurance policy which only has death benefit as the only cover. You also have the option to include additional benefits that cover conditions such as accidental death and disability at the price of a nominal premium to the base term life insurance. These added benefits, also called ‘insurance riders’, can help you with multiple benefits on your insurance policy.

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