There are well known methods to arrive at a ideal insurance cover for an indiviual.These further explains the significance of term insurance
Income Replacement Value
1. Age = 40
Annual Income = 5,00,000
Retirement Age = 60
Insurance Cover needed = (60-40) * 5,00,000 = 1 crore
Another variation, is to mutiply the income with a mutiplier to calculate your life cover.The multiplier differs across various age groups
20-30 years = 5-10 times annual income
30-40 years = 15-20 times annual income
40-50 years = 10-15 times annual income
50-60 years = 5-10 times annual income
So when you fit into any of this category and calculate your insurance cover it would be amounting to a significant sum.
When going for a typical endowment policy for such a insurance sum(eg 1 crore for 40 years old earning 5 lacs annually) , the premium would shoot to very high levels.
Term insurance 's cost benefit will be best exploited in these scenarios.
Always keep Insurance and Investment seperate.
Related Topics
What is term insurance?
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