Buy a Life Insurance Plan in a few clicks
Protect your family's financial future.
Insurance and Investment in one plan.
Thank you
Our representative will get in touch with you at the earliest.
Features
Ref. No. KLI/22-23/E-BB/492
Along with growing health concerns, the price of receiving quality medical care is also rising, which causes people to worry about a lack of resources. A term plan purchase is a simple way to give your loved ones’ financial security.
When you finally decide to purchase a term insurance plan because you have dependents and want to protect their financial interests, the next step is to determine how much coverage you need. The coverage amount you choose is essentially the sum assured of the policy.
In other words, the sum assured in a term plan is the maximum pre-defined amount that the insurance company pays the nominee in the event of the policyholder’s demise during the policy period. It is important to choose the right sum assured as it has a significant impact on the premium you pay for the policy.
Also, it must be adequate for your family to take care of their future expenses. So how can you choose the right sum assured when purchasing term insurance? Let’s find out.
Calculating a sum assured amount for your term insurance must be done by keeping the below factors in mind. These factors eventually will decide how much would be enough for your family.
The sum assured amount must:
- act as a replacement for your income in your absence
- cover all of your outstanding debts
- allow your family to maintain their standard of living
- allow your family to meet their future financial goals
But it can be difficult to accurately ascertain an exact figure just by looking at the above points. You may get a rough idea, but you cannot predict precisely how much would be enough for your family. To do that, you can follow the steps given below:
First and foremost, you must calculate when you’d be retiring and how many years more you’d be earning. For example, if you are 30 years old and plan to retire at 58, you have 28 earning years left. This strongly impacts the sum assured you need since a term plan is an income replacement tool. If you have lesser earning years, you may need a higher assured sum and vice versa.
Your annual expenses at present are taken care of by your earned income. Even in your absence, your family would need a source of funds to carry out those same expenses. And hence your term plan can come to the rescue. That is why when you calculate your assured sum, you must calculate your annual expenses. Add up all your recurring expenses like school fees, medical expenses, grocery and utility bills etc. Find out what your total outgo for these expenses is at the current price.
When you assess your income and expenses, you can use the following formula to decide the sum assured of a term plan accurately.
Minimum sum assured = Annual Income x 10times + Loans/Liabilities
Some expenses are not recurring but one-time expenses like higher education fees, wedding expenditures, vacations, etc. Your family will rely on your term plan for these expenses as well. So, you must chart out a detailed projection of when they’d need these amounts and what the amount would be. Based on your calculation, add these amounts to the sum assured calculation.
Once you get a figure, add liabilities like a home loan, car loan and other debt. This is the total sum assured you need. But you may also have some assets like stocks and savings. Subtract those from the final figure, and the amount you get is the total assured sum you must choose for your term plan.
You must comprehend the idea of a sufficient sum assured when purchasing a term insurance plan for you and your family. It is frequently stressed because it establishes the basis for your financial stability. Making an informed choice when buying a term plan is necessary since it will have a significant impact on your financial portfolio.
You can also purchase additional riders, such as critical illness insurance, disability insurance, accidental death insurance, waiver of premiums, and many others, in exchange for an additional sum assured premium.
When purchasing a term plan, remember that the sum assured premium shouldn’t be your only consideration. If you currently have a term plan but are unclear if it offers enough life insurance, you can balance it out by purchasing a new term plan from a reputable insurer.
Along with sufficient life cover and affordable sum assured premium, here are a few more things you must check before investing in a policy:
The claim settlement ratio, sometimes referred to as the CSR or claims paid ratio, is a statistic that illustrates the proportion of life insurance claims that an insurer has resolved (paid out) over the course of a fiscal year. The settlement ratio is, in other words, the proportion of total insurance claims paid out by an insurance company to the total number of claims received.
It is advisable to comprehend how term insurance operates and what it covers exactly before making an investment. When selecting a term plan, be sure to examine several insurers based on the premium for the sum assured and the protection they offer against it.
To prevent such misunderstandings and claim denials, it is crucial to fully understand the inclusions and exclusions of the life insurance plan.
Every insurance company has a series of inquiries regarding your health, occupation, and way of life. It is crucial that you provide accurate answers because they will determine whether you qualify for a telemedicine visit or a traditional physical examination. Regarding your claims process, both of these medicals (the ones you’ve had) are equally important.
The cost of providing for all current necessities while also securing the future of one’s family varies depending on the individual. If you are the only provider for your family, you must think through every possibility and be well-prepared for it. You can live a stress-free life if you choose the term insurance coverage that is appropriate and sufficient. You and your loved ones may face financial difficulties if your life insurance is insufficient. So, before investing in a term plan, thoroughly consider all of its components and how they connect to your life.
Therefore, choose the appropriate sum insured in life insurance to ensure your financial security.
Thus, if you’re planning to buy a term plan, don’t just choose an arbitrary number or go with a number suggested by the insurance agent. Do the necessary calculations as mentioned above and figure out how much your assured sum should be.
A term insurance rider, which carries an additional premium, adds further protection or coverage to a term insurance policy. These add-on benefits that are included with these riders oftentimes benefit the insured. There is no guarantee that everyone will find these riders useful or necessary, though.
By purchasing a term plan online, you help the insurer cut back on distribution costs, commissions, and various other charges. They reduce your premiums in exchange for passing the savings along to you.
Calculating a sum assured amount for your term insurance must be done by keeping the below factors in mind. These factors eventually will decide how much would be enough for your family.
The sum assured amount must:
Act as a replacement for your income in your absence
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
Get a Term plan that offers high coverage at low, affordable premiums
