Term insurance is a fundamental component of financial planning, offering a safety net for your loved ones in case of unforeseen circumstances.

However, a prevalent mistake many individuals make is underestimating the coverage amount required. This oversight can leave families financially vulnerable during challenging times.

Understanding Term Insurance Coverage

A common guideline suggests that your term insurance coverage should be 10 to 15 times your annual income.
This accounts for your family’s:

Ongoing living expenses

Outstanding debts

Future financial goals

Inflation

Factors to Consider When Determining Coverage

Annual Income

Your income reflects the financial support your family depends on.

Outstanding Debts

Include liabilities like:

Home Loans

Credit Card Dues

Personal Loans

Future Financial Goals

Children’s education

Marriage

Spouse’s retirement needs

Existing Assets

Consider:

Savings

Investments

Any liquid assets

Common Mistake: Opting for Insufficient Coverage

Many individuals arbitrarily choose a term insurance amount (like ₹1 crore) without a complete needs assessment.
This can lead to inadequate protection, leaving dependents under financial pressure.

Case Study: Calculating Adequate Coverage

Let’s consider this scenario:

Annual Income: ₹10 lakhs

Outstanding Home Loan: ₹50 lakhs

Children’s Education Fund: ₹20 lakhs

Spouse’s Retirement Corpus: ₹30 lakhs

Existing Investments: ₹10 lakhs

Total Coverage Needed:

(₹10 lakhs × 15) + ₹50 lakhs + ₹20 lakhs + ₹30 lakhs − ₹10 lakhs
= ₹2.2 Crores

In this example, ₹2.2 crores of term insurance ensures your family’s financial security.

Conclusion

Determining the right term insurance coverage is essential for protecting your loved ones.
By evaluating your income, debts, goals, and existing assets, you can choose a policy that offers complete peace of mind.

Ready to Secure Your Family’s Future?

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