How much TROP coverage do you need?
How much TROP coverage do you need ? While the insurance needs of people differ from individual to individual, it is always said that your term life cover should be at least 20 times your gross annual income. However, since term insurance with return of premium is a little more expensive than a regular term plan, you must understand how much cover you want to buy. The higher the cover, the higher the premium will be. Once you are clear about this, you can go on to calculate the amount of TROP coverage you need.
What are the factors to consider when calculating the TROP cover?
When calculating the TROP cover, keep the following in mind:
- Dependent family members – You need a higher amount of TROP coverage if you have dependent family members like a spouse, children, parents, etc. You have to have enough coverage so that if you die, their monetary needs will be taken care of. You have to take into consideration factors such as your children’s school fees, the household expenses and bills, your parents’ medical expenses and so on. You have to have a cover that is large enough to pay for these even in your absence.
- Loans – You must also take your loans and mortgages into account when buying a TROP plan. If you have high amounts of money that you owe to the lenders, you need a high TROP cover.
- Your health – Health plays an important role in deciding how much cover you need. If you have been ill of late or have some congenial disease that can lead to death, buy adequate TROP cover so that your family doesn’t suffer economically after your death. It is important to note here that if you are of an unfit health, the premium of your TROP will rise considerably.
For how long should I stay covered?
While buying a TROP plan, you not only need to calculate the amount of coverage, you also need to calculate the term for which the policy needs to be taken. Many people make the mistake of buying a TROP for too long. You need a TROP plan till the time you have financial responsibilities. So if you have a 5 year old child, you need to buy a TROP plan for a maximum of 20 years as it can be safely assumed that by the time the child is 25 years old, he will be financially independent. A TROP plan gives you your money back at the end of the term and till then you pay a high premium. So continue with the plan till as long as you need. Beyond that you would be paying the premium uselessly and your money will also be stuck.