Our responsibilities grow in the same proportion as our family grows. We start saving in the best way possible so that we may take care of our family members nicely and responsibly. We start planning for the future of our children and even the life after our retirement. Everything we think is actually about our family. Well, when we are so concerned about the future of our family, we must also consider a situation where we are not there all of a sudden. Can you imagine the family you have been shielding so much, gets clueless about their life, especially the financial part? We all know life is uncertain and anyone of us can get caught in one such circumstance. What we need to do is to be prepared for such days. And the best way to keep things a bit under control is taking term life insurance.
How can term life insurance help?
Term life insurance is a life insurance product that you can buy for a certain period. There is a specific tenure, throughout which you have to pay a minimal premium. The premium can be monthly, quarterly, or annually. If you pass away within the tenure, the nominee of the term plan will get the death benefit. If you survive through the tenure, you may or may not get the premium amount; however, it depends on the kind of term insurance plan that you buy. You can add riders to the plan to get additional benefits.
Nevertheless, before buying term insurance, you can try a term policy calculator and be sure about the term insurance that you need. There are various methods that you will get in term insurance calculator, and through which you can get an idea of the kind of term insurance you need.
What is a term insurance calculator?
A term insurance calculator is a tool that helps you understand the kind of premium amount that you would need to pay for your term insurance plan. You can get an online term insurance calculator to get an idea of the premium amount.
Method 1: Human Life Value (HLV)
As per this method, the amount of life cover that you can buy should be proportionate to human life value. It can be called the capitalized value of the insured for the rest of their life which is actually calculated based on the current inflation. The HLV in a term plan calculator is calculated based on factors such as age, current, and future income, and current and future expenses.
Method 2: Income Replaceable Value
In this method, the life insurance coverage is calculated based on your annual income. To find out the required insurance coverage, the annual income is multiplied by the number of years that are left for retirement.
Method 3: Need Analysis
In this method, the coverage is calculated based on regular expenses till the life expectancy of the youngest member of the family. The factors that are assessed are:
- Children education
- Children marriage
- Number of dependents and their requirements
- Provision for the spouse who is not working
- The kind of lifestyle the insured provides to the family
- Other special needs.
Now the expenses are summed up, the figure that you get is the amount that the family needs today. Now you have to deduct the life insurance policy that you already had along with all the assets you have. The new figure that you get is the gap that needs to be bridged.
Method 4: Underwriter’s Thumb Rule
As per this method, the needed sum insured has to be in multiples of the annual income which totally depends on the age. For example, an insured who is between 20-30 years of age range should have coverage worth 25 times of their annual income.
All of these methods help you calculate the financial commitments that you need to fulfill in the future and how much amount will be required for the same. You can then move to choose the right term insurance plan. You can head to the IIFL Insurance website and get to know the suitable plans that fit your requirements and have the features that you want.