What is the right amount of life insurance cover for me? Finding an answer to this question can be difficult. If you are facing the same problem, then read this article to find out an estimated amount that is right out for you.
Nowadays, insurance providers have made it extremely easy to buy a life insurance plan. However, finding the right policy has become very difficult. Often, policy buyers spend hours researching which insurance provider is better or which type of policy they should buy – whole life, term life, etc. However, one factor that many ignore is the right life cover amount.
If the cover amount is little, then your family might not get adequate financial support in case of your untimely demise. If the cover amount is too high, then your current lifestyle might suffer as you will have to pay higher premiums. Thus, it is of utmost importance to select the right cover amount.
Two crucial factors that you need to consider while deciding the cover amount are-
- The income your family will need in order to replace your income if you pass away untimely.
- All the other expenses that you want to cover, such as a home loan, children’s education, etc.
Here are a few questions that you need to ask yourself in order to find out the right cover amount-
How Do I Determine the Right Cover Amount?
If you research how to find the right cover amount, then you will find a method called ’10 times your salary’. What this method means is that you take your annual income and multiply it by 10 times. The result is the ideal amount of life cover you should consider.
Furthermore, it is not necessary that your life cover must be 10 times your annual salary. It can be 5 times or 20 times. That number depends on various factors such as inflation, your current financial condition, future expenses, etc. For instance, if you have considerable savings, then you can select a lower cover amount. However, if you have many debts, then you should consider a higher cover amount.
What Should I Do If I Have Debt?
It is extremely important to consider your debts while finding out the right cover amount. This is because, in case of your untimely demise, your co-signer will have to repay the debt. If your cover amount is low, then you might put your co-signer under a lot of financial burden.
Thus, while calculating the cover amount, take all your debts into consideration. This way, you can provide financial security to your beneficiaries.
Do I Need to Consider Future Expenses?
One of the most crucial future expenses that you need to consider is your children’s education. If you pass away untimely without providing adequate financial support, then it might impact your children’s future. You need to ensure that the cover amount is sufficient for your children’s education.
In conclusion, the main aim of buying a life insurance policy is to provide financial security to your beneficiaries. Therefore, you need to ask yourself these questions to find out the right cover amount.