Until when should I have an Insurance Cover for myself? If I am taking an insurance plan, how much cover would I need? Are these the questions that are pondering you while buying an insurance policy? I can help you make the decisions and answer your questions. Before that, here a heads-up to answering those questions:
Q: Until when should I have an Insurance Cover for myself?
A: It is not only the term of the insurance plan that is to be considered but also the amount of risk cover. Experts say that ideally a life cover should last until 65 years (although it may vary based on circumstances). This has changed as people have continued to work beyond the age of 60. Also, late marriages and having children at an older age means that responsibility extends beyond the age of 60. Thus, it is advised not to go for a short-term insurance cover as it may end up providing you returns at an early age itself when your responsibilities have not yet been full completed. For example, if you are taking an insurance plan with a shot cover of say 15-20 years which might end when you are in your 40s. It is true that you will always need a life cover when you’re in the 40s and if you take an insurance plan then, it is likely that it will cost you more than you would expect; in fact, in some cases you might also be denied of a life cover if you have fallen ill.
Be wise in choosing a term for your life cover and the longer it is, the better. Also, lesser the premium you will pay. This is because you will be insuring yourself even for the non-risky years. It is also suggested to go for a term plan which provides you flexibility in fixing the term. May term plans come with a fixed tenure of 15, 20, and 25 years while other don’t offer insurance beyond 60 years. It is always best to choose a plan that can be customized to your needs.
Q: If I am taking an insurance plan, how much cover would I need?
A: A life insurance is best if it provides enough money to the dependants in case of a policyholder’s death which is close to his/her income. Life cover should always be high as it can be helpful for critical expenditures such as marriages of children or liabilities like loans. Taking a low risk cover can result in insufficient returns in case death of the policyholder there by not serving the purpose of life insurance.
The thumb rule is that you should have your life insurance cover should not be less that 8-10 times your annual gross income. Another thing to be considered is that for a life insurance policy, a term insurance is the best bet.