What is term life insurance?

Term Life Insurance

Read Carefully:-

Term life insurance is a type of life insurance policy that gives you coverage for a specified period. If the life insured dies during the term of the policy, the cover amount is paid to the nominee. It gives financial security to the family in case of death of the insured.

Term life insurance provides financial security to your family in the event of your death. If you want to ensure that your family does not encounter financial difficulties while you are away, you can get term insurance.

However, it is commonly seen that before purchasing insurance, the most pressing concern on people’s minds is how much term insurance coverage should be purchased. Many formulae have been proposed by experts. You will be able to estimate the quantity of insurance with their assistance. We’ll tell you about them today.

The Human Life Value, is the idea of human life is worth

The Human Life Value (HLV) idea determines how much money a person may make over the course of his working life. After that, the anticipated inflation rate is used to discount it. In other words, that person’s cash inflows are computed using today’s pricing. This value is subtracted from the individual’s spending in order to determine the family’s economic value.

Assume Ramesh is a 40-year-old man with a yearly income of Rs 5 lakh. He spends 1 lakh 30 thousand rupees on personal costs out of this. The family receives the remaining Rs 3 lakh 70. Ramesh’s economic worth will be 3 lakh 70 thousand rupees. That is, his family would require 3 lakh 70 thousand rupees every year even if he is not present. According to this necessity, you should select a term insurance policy.

Income replacement value concept

This is a basic way to calculate your life insurance coverage needs and is based on your annual income. Accordingly, the required insurance coverage is the multiplier of your annual income plus the remaining years of retirement. i.e. required insurance coverage = annual income x number of years for retirement.

For example, suppose your annual income is Rs 4 lakh and you are 30 years old and are planning to retire after 30 years i.e. at the age of 60 years. In this case, your required life insurance coverage should be Rs 1.2 crores (4,00,000 x 30).

Underwriters thumb rule

Under this, the sum insured should be in multiples of annual income based on age. For example, individuals in the age group of 20 to 30 years should have life insurance coverage of 25 times their annual income. Whereas, those above 40-50 years of age should have life insurance coverage of 20 times their annual income.

If you have taken a loan then keep that in mind too.

If you have a loan or debt, then this should also be kept in mind. In such a situation, if you have taken a home loan of 50 lakhs, then this should also be included in the term insurance cover. If you have other loans or debts, then the insurance cover should be decided to keep them in mind.

Term Life Insurance Advantages and Disadvantages

term life insurance