Life Insurance is an instrument through which you can protect your family’s financial future in your absence. Unfortunately, people in India either don’t have life cover or have less insurance coverage than required. Most often its importance is valued after the demise of the policyholder. However, slowly people are becoming aware of having enough cover. A term plan is one of the cheapest life insurance options to provide sufficient financial cover to your family.
Buying life insurance plan cannot be a one-time decision. Over time as life progresses, you should reassess your family’s life cover needs. There are multiple factors which influence your life cover need, or, in other words, your human life value.
Let’s have a look at the five most important life stages when you should review your life cover:
Before getting married you have fewer obligations and financial dependency. However, post-marriage financial dependency of your spouse might increase your expenses, lifestyle and hence your need for life cover.
Marriage also helps you dream bigger and have more financial goals jointly than both of you had separately. Therefore, increasing the cover to match the newfound goals is just the logical step to ensure financial safety for these goals.
Similarly, the arrival of a new-born baby in family brings joy as well as added responsibilities over parents. On one hand, expenses increase and on the other child’s future goals also begin to take shape. As parents, you will try to do everything in your power to help your child realise her dreams.
Thus, the first step is to add these goals to your life cover. So, even if life doesn’t allow you to be a part of the journey, your children can make it through.
The best term life insurance plans allow their policyholders to increase the life cover amount at this crucial moment. For example, Canara HSBC OBC Life’s online term plan iSelect Star, allows a 50% increase in the sum assured after marriage and a 25% increase at childbirth for up to two children.
So, if you purchased a term life policy worth 1 cr. before your marriage, with the birth of your second child, you can have a life cover of Rs. 2 crores, without having to buy a new term insurance plan.
Exponential Income Growth
Growth in income will not only put you in a different wealth status, but it also improves your social status and upgrades your lifestyle. Thus, it only makes sense to match your available life cover with your new lifestyle and financial status.
It is important for your family that you increase your life cover to match your growth. So, they don’t have to downgrade their lifestyle due to an unfortunate event. Although it may not be possible for you to increase your existing life cover after income growth, you can buy additional life cover to match the change.
If you want to build or purchase a house or in case if you to start a new business or to expand the existing business, you might end up taking a loan. The moment you have this liability, you should also consider the contingency plan for your family’s financial safety.
You need to think of the risks which can put your family in financial distress and insure against them. Physical disability, life-threatening disease like cancer, or untimely death are such risks which could affect your income and loan repayment.
Therefore, if you can have sufficient life insurance cover for all these three risks, your family members will have an easier time moving on in life in case anything happens to you.
For example, considering current financial responsibilities if you have a term plan of Rs. 75 Lakh and you take a home loan of Rs. 50 Lakh then to cover this additional liability you should reconsider your insurance requirement and buy additional cover worth Rs. 50 Lakh.
Simply put, just having a life insurance policy is not sufficient, it should be large enough to cover your family’s financial future. Revisiting your life insurance need from time to time is important and can be really helpful to your family members.
Also, don’t forget to add your spouse to your life cover, especially after childbirth, even if she’s not formally earning money herself. Mother’s contribution to the growth and wellbeing of a child is immense and thus they have a significant life value for life insurance. Adding life insurance for the mother will ultimately help you take care of the children if anything happens to her.