Need to take an INSURANCE POLICY as early as possible | Role it plays in Future Goals

We will discuss the various factors to consider before buying an insurance policy.

COVER FOR LIFE:

Life insurance is supposed to replace the monetary value of a person so; it becomes very important to judge the right amount. Secondly, it becomes imperative that the earning member gets his life insured and gauge what sum would be suitable for the beneficiary or nominee in case of unfortunate death.

COVER FOR HOME LOAN:

If you have already taken a housing loan to fund your dream home, the next step is to take a life cover of the same amount. This is to secure the future of your loved ones in your absence that is, if in future they are unable to continue paying the EMIs on the loan.

HOW TO CALCULATE:

The way is calculate is to work backwards. For example, if the living expense of your family is Rs.30,000/month, then they will need Rs.72 lac earning 5% per annum after tax to ensure that they continue the same lifestyle post your demise. This amount does take inflation into account, which means that the monthly expense could rise to Rs.62,000 a month 15 years later!!

VALUATION OF HUMAN LIFE:

The Human Life Value method considers your earning capacity throughout your lifespan to determine the Insurance cover you need. For instance, if you are currently earning Rs.10 lac p.a. and have 25 years to retirement, the human life value at constant earning comes to Rs.1.40 crore. If we take into account increment of 5% p.a. in earning, the value will increase by another Rs.1 crore.

INSURING FOR FUTURE GOALS:

Unit-linked policies are good as they provide for the future, for your children – their education and marriage; if these are minimum 12-15 years away and you are able to pay all the premiums. This plans need to be fulfilled and achieved even if you are not there to do it yourself, provisions still have to be made. In this case a pure term product will not help you, but policies that have the feature of waiver of future premium after your death will be more suitable; as at maturity, amount will be available for your loved ones.

WHEN TO BUY ?

All factors discussed above took into account the risks covered by insurance if you were to die prematurely. This is because life is full of uncertainty. We have all known of accidents that have claimed many lives. Sudden illness, stress, work pressure, study pressure, etc. makes it necessary for careful planning to reduce the burden in any way possible. This makes it clearly very important that life insurance is calculated and taken as soon as possible, even immediately if possible…

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Tags: Health Insurance, HOME INSURANCE, insurance information, insurance plan, Life Insurance, ULIP