In life, we all try to be careful about selecting only things that are best suited for us. Whether it is about choosing a career, following a day plan, or buying a vehicle, things are pretty sorted when we make these selections. But selecting the right sum assured while buying a term life insurance policy is easier said than done. There is no specific definition of what ‘right sum assured’ will be for each individual. That is the reason why choosing ‘adequate’ as an adjective to the sum assured sounds better.
What is Adequate Sum Assured?
In addition to the basic definition of what is insurance, the adequate sum assured under a term life insurance policy refers to the life cover that is most suitable for your specific needs. You can estimate this by focusing only on what is most important for you and your family financially and not being highly influenced by peer recommendations.
Selecting an adequate sum assured is as essential as buying the best term life insurance policy itself. The reason is quite clear –
An inadequate or insufficient life cover won’t make much difference in your life except that you have to pay a premium for it. In calculative terms, a life cover of Rs. 5 Lakhs only won’t do much good to your family in case of your unfortunate demise if you know that they have to bear a financial burden worth Rs. 50 Lakhs or above. The phrase, ‘something is better than nothing’ does not hold much importance in this context.
Why Should You Choose Sufficient Sum Assured?
There are many sides of life to be considered to answer this question as a whole.
- If you are the only breadwinner in your family, you would want the loved ones to live happily without facing any financial crunch in your absence. An adequate life cover under a term life insurance policy will help them deal with financial liabilities in life.
- Having a single income source in the family requires careful financial planning to meet various life goals. By choosing the best term life insurance policy with maturity benefits, you can plan to fulfill these goals without facing any financial constraints.
- Since the policy nominee will receive the insurance benefits under the term plan in the future years, inflation will impact the expenses. This makes the rate of inflation a crucial factor that you need to consider while choosing a sum assured under a term life insurance policy.
- The current COVID19 pandemic has made people across the world think twice about financial planning. The adequate sum assured under the best term life insurance policy also means selecting a COVID insurance rider to get health and life cover during these challenging times.
How to Select Adequate Sum Assured?
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- Analyze Your Expenses
Financial backup for family implies having a source of income or a lumpsum amount by their side, which they can use to meet their regular expenses for a comfortable living. You can only select an adequate sum assured when you have a fair idea of these expenses in mind. Hence, start with looking at regular expenses, the inevitable ones at least like children’s school fees, utility bills, and similar others.
You should also check if you can accommodate a slightly higher premium for a term life insurance policy to get a higher sum assured.
- Look at the Current Liabilities
Consider this from a layman’s perspective –
If your current savings are way less the financial liabilities you have in the form of a personal loan, car loan, or home loan, their burden would ultimately fall on your family in case of your unexpected demise.
For utmost financial security, the sum assured under your term plan should cover these liabilities entirely.
- Think About Your Retirement in Advance
No one else knows about your goals in life better than you do. While working in the current years, you know when you would want to retire and enjoy life afterward with your family. Similarly, you have a better idea of all your life goals that you want to accomplish.
A good way to approach term life insurance policy purchase is to choose premium payment tenure within your working years. While doing so, it will determine the payment accordingly based on the chosen sum assured. There should be a balance between affordability and adequacy while selecting the right sum assured.
Cover Your Life with Online Term Life Insurance Policy
As the government rules say, there is no need to step out of your home these days unless it is absolutely necessary. The same rule is applicable while buying life insurance. Budget-friendly life insurance plans from renowned insurers like Max Life Insurance are easily available online. Also, you can save more money as there are no middlemen involved. Make sure you choose a suitable policy after carefully analyzing its benefits and features.
