How much Increasing Term Life Insurance coverage do you need?
How much Increasing Term Life Insurance coverage do you need? Increasing term life insurance is a form of term plan where the value of the sum assured increases every year. It is a beneficial type of insurance for those people who want to protect their family from the rising costs of the future.
How to determine the amount of increasing term insurance coverage that is needed?
To determine the amount of increasing term life insurance coverage that you require, you need to keep the following points in mind:
- Inflation – Inflation is one of the main reasons why people opt for increasing term plans. Did you notice how quickly the price of fuel is increasing? And what about the fruits and vegetables? A kilogram of mango that cot Rs. 40 last year now costs Rs. 55. So we can see how the price increases with time, and the insurance cover you have today may not be sufficient for your family 20 years down the line.
- Liabilities – As you grow older, your liabilities increase as well. So when you may have bought the term plan, you may have been young and single. But now, with time, you have a spouse and children and the amount of coverage you have on your term plan may not be sufficient to meet all their needs. Therefore, since with age our liabilities increase, we would benefit from an increasing term life insurance plan.
- Age – If you had bought your life insurance policy at a young age, then in all probability you have gotten a large cover at a very low cost. If this is the case, you may or may not need an increasing term life insurance. However, if you do not have enough coverage on your life insurance plan, and you realize you are getting older, it is a good idea to buy an increasing term plan.
- Health – One of the most remarkable features of an increasing term plan is that the policyholder’s current health (health at the time of the commencement of the policy) is taken into account throughout the policy period. Since health plays a role in determining the premium, the insurance company sets the premium after evaluating the health of the person when the policy is being bought. Even if at a later stage during the policy the policyholder gets ills or contracts a disease, he won’t be held accountable for that in respect to the premium. So if you are young and healthy, but feel you have a chance of getting sick later, buy an increasing term plan.
Will these factors help me calculate the amount of increasing term life insurance coverage I need?
Yes, the above mentioned factors are indicators of how much increasing term insurance coverage you need. So keep these points in mind and discuss them with your financial advisor. Only then will you have a proper idea of the exact amount of increasing term coverage you need.