Q. I am 35, married and have elderly parents. My annual income is around ₹1 crore. I have been saving for retirement for some years now and have invested in various financial products. I am planning to purchase life insurance to ensure my family is financially secure when I am not there. What should be the ideal coverage? Which policy should I choose?
Life insurance is a contract between an individual and an insurance company, where the individual pays premiums in exchange for the insurance company's promise to pay a sum of money to the designated beneficiaries upon the individual's death.
Life insurance can provide financial security to your loved ones by helping to cover mortgage payments, education costs, daily spends and other living expenses in the event of your unexpected death.
When considering life insurance, please consider the following factors.
Coverage amount: This is the amount the insurance company will pay out to the designated beneficiaries upon your death. It is generally recommended to have life insurance coverage that is at least 10 times your annual income. However, the ideal coverage amount may vary depending on your financial goals, debts, and other factors.
Policy type: There are several types of life insurance policies, including term life insurance, whole life insurance, and universal life insurance. Term life insurance provides coverage for a specific period, such as 10 or 20 years, while whole life insurance and universal life insurance provide coverage for the duration of your life. Term life insurance policies tend to be more affordable. Whole and universal life insurance policies may charge higher premiums but often provide additional benefits such as a savings component.
Premiums: Premium is what you pay the insurance company in exchange for coverage. Premiums may be paid annually, semi-annually, or monthly. It is important to choose a policy with premiums that fit within your budget and that you can afford to continue to pay over the life of the policy.
Insurance company: It is important to choose a reputable insurance company that has a good track record of paying claims. You may want to research different insurance companies and consult with a financial advisor or insurance agent to ensure that you choose a reliable provider.
Given your income and family situation, you may want to consider a term life insurance policy that provides coverage for a specific period, such as 10 or 20 years. Based on your current annual income of ₹1 crore, you may want to opt for a coverage of at least ₹10 crore.
Ultimately, the goal of life insurance is to provide financial security and peace of mind for you and your loved ones, so it is essential to choose a policy that aligns with your long-term financial goals and meets your specific needs. You may want to consult with a financial advisor or insurance agent who can help you navigate the various options and choose the best policy for your needs.
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