Guide to Plan a Life Insurance Cover for Your Family
While purchasing a life insurance plan, the sum assured becomes the most vital part of it. As the death benefit is hypothetically the sole financial backup, you have to make sure that you plan it wisely. It is not just a number but a future for your loved ones in case something happened to you. So, let’s understand how to choose the perfect cover for your family.
First Method: Multiply Income By 10
This method is the simplest way of calculating the sum assured that you should choose. A drawback of such an approach is that it doesn’t consider your family’s expenses. It only gives you a rough estimate by presenting an amount ten times your current income. Another thing that isn’t accounted for is the contribution of any family member as a homemaker. The services like daycare can be quite expensive, which also has to be taken into consideration.
Second Method: Consider Various Expenses
In this method, you have to consider the expenses of your family along with the debts and investments. This will give you an approximate amount that you can consider as the sum assured after adding the inflation rate as well.
Debts: If there are any housing, mortgage, or personal loans to your name, you have to count the installments of it in your sum assured as your family will need financial assistance to pay it off. Another expense that can be accounted for is the cost of your funeral and last rites to help reduce the burden on your family.
Income: You need to estimate the number of years your loved ones would require financial support by considering the age of your children. Also, you need to work out the number of years your children will be dependent on the insurance amount until they finish their education. You can multiply this number by your income, and the amount is another component to be added to the final sum.
Education: With the number of kids and the age of your children, you can calculate the amount needed until their higher education.
You can also include any savings and other investments that you may have, but it is not necessary to be exact as some extra money will aid in the long run.
From the above-given methods, you can opt for anyone to calculate the sum assured for your life insurance plan. You can also take the help of online calculators which will aid in working out the death benefit for several types of insurance policy. Now, you can be worry-free about the financial security of your loved ones.
I am Daisy Bell and a pro-level blogger with years of experience in writing for multiple industries. I have extensive knowledge of Food, Fitness, Healthcare, business, fashion, and many other popular niches. I have post graduated in arts and have a keen interest in traveling.