We all know one reality of life is that it is limited and entirely uncertain. But to ensure that your loved one remain financially secure and stable during the uncertainties of life, you should do financial planning. Life insurance plans can assist you in securing your family’s finance.
It is a great way to ensure their protection in case of your unfortunate demise. Moreover, it helps manage the finances and ensures that providing for day-to-day expenses and other mandatory costs like education and health care is demanding and worrisome for those left behind.
This article will cover answers to basic life insurance-related questions like how much term insurance do I need to ensure a stable financial future for my loved ones?
How Much Term Insurance Do I Need?
The central part of choosing life insurance depends on your financial goals, the number of dependents, and determining what the dependents will need in your absence to have a financially stable life.
The face value (the amount you receive from your policy in case of your death) of your policy depends on some factors. For example, the minimum amount to sustain a financially-stable life in your case may be lesser than those who maintain an expensive lifestyle. Although, life insurance experts suggest that an individual should have a minimum life insurance coverage of 10 to 15 times their annual income.
So, if you are earning ₹10 lacs per annum, you must have a term insurance cover as much as ₹1 crore, ideally. However, depending upon your monetary status, the amount may be higher or lower. To further understand the how much premium you will be paying for a 1 crore term insurance policy; it is advisable to check the term insurance quote.
How Many Insurance Policies Should I Have?
Since the answer to “how much term insurance do I need?” is now known to you, let’s shift our focus to understanding how many life insurance policies you need.
Selection of life insurance policies must be made after thorough research and analysis. Also, an individual must look through all aspects of their life and, after proper financial planning and evaluation of their current financial condition, opt for life insurance policies. The market is packed with multiple types of life insurance policies designed to serve the investors’ different financial needs. Also, some life insurance policies are purely for life insurance and have no investment angle linked to them, like the term insurance policy, which only pays out in case of your death during the policy term.
Here are a few essential types of life insurance that you must have:
1. ULIPs for Wealth Creation
ULIPs are among the most popular life insurance plans in the market currently. An individual should opt for a ULIP plan for wealth creation purposes. ULIP plans come with dual benefits of life cover and market-linked investment opportunities. This means that you have a security of life insurance, and at the same time, you are invested in the market-linked securities, which can earn a decent profit if wisely managed.
2. Guaranteed Savings Plan for Savings
A savings plan is essential to fulfilling your mandatory mid-term and long-term goals like your child’s higher education or a savings corpus for futuristic purposes like marriage, home, business, etc.
When you opt for a guaranteed savings plan, you earn a guarantee of a decent payout, either in case of the plan’s maturity or the unfortunate demise of the policyholder. Therefore, guaranteed savings plans’ returns are better than other savings plans. You can also opt for traditional long-term plans like Public Provident Funds, but they don’t offer life insurance coverage like the guaranteed savings plan.
3. Annuity Plan - Retirement corpus
This plan serves as the best retirement fund for you. Once you retire, other financial resources start depleting due to various factors like health and liabilities to maintain a good living standard. However, when you invest in an annuity plan, you ensure that you will have a regular source of income, and even after your death, your wife will receive a steady income up to a certain age. This plan reduces your dependability on your family and gives you a sense of independence in your old age.
4. Health Plans- Health is Wealth
We all know that healthcare is a costly part and parcel of our life. Therefore, it is imperative to have health insurance once you turn 18 years - 20 years old. This way, you can build a good corpus at a low premium to pay for your health issues before you turn 25. Generally, insurance companies demand higher premiums as you grow older due to increased health vulnerabilities. Investing in health insurance with critical illness cover early in life can help you build a large corpus to cover your health-related issues as you grow old. Ignoring health insurance can cost heavily in your pocket and may even derail your financial stability.
Conclusion
Overall, you must analyze and understand the financial requirements and uncertainties of life and plan your finances accordingly. Having life insurance ensures that your financial burden decreases and that you can enjoy your life while saving and building a decent wealth for yourself and your family.
