Do you need life insurance cover? Well, the answer depends on you. The benefits of insuring your life will be availed by your loved ones, who depend on you, when you are not there.
Having said that, if you do not have anyone who depends on you financially you do not need to buy a life insurance.
But, most of the time, the bread winners and earning members of the family, like you, have dependents and must safeguard their well-being at all times.
Rid Yourself Off The Tax Benefit Misconception
Many people in the country think life insurance is about saving tax! Though you get some tax deduction by buying insurance, nevertheless treat it as an expense rather than as a tax saving investment.
Why Term Insurance Cover Is What You Need
A Term Insurance Plan is typically for duration ranging from 1 to 30 years, You get the benefit of a term cover only in case of premature or untimely death. They come with a lower premium price, as compared to other kinds of policies. The advantage here is, you can choose to buy cover for a preferred time duration, so it is in fact, never too late for you to buy this policy.
Life Insurance Is Not An Investment For Your Money
When you set out to buy a life insurance policy, treat it as a purchase decision and not an investment. Just like your car or bike insurance.
You must understand that buying life insurance is not the same as investing your money in mutual funds or in any other investment avenue (property, gold, stocks).
How Much Should You Be Covered For?
Insurance is not about creating a large corpus for your dependents – it’s about replacing the income your family would have got had you been around.
So, if your insurance beneficiary is going to be your parents, the insurance amount should be able to provide them the amount that you contribute towards their care.
If the beneficiary is your spouse and children, it should be able to provide an amount that is equal to your take home salary. Remember that these expenses would normally grow with each year, especially in the case of children.
A good rule of thumb is to insure for 300 times the monthly amount you need. So if your take home salary is Rs 30,000 you should have insurance of Rs 90 lakhs. This amount, when invested in debt funds or bank FDs will be able to generate an equivalent income for your dependents that keeps pace with inflation.
So What Should You Do?
If you have dependents, get insured today. These days online services, such as Coverfox, can help you get a term insurance quickly. For someone in their early 30s and who are non-smokers, a term policy which assures your dependents a sum of a Rs. 1 Crore can be bought for less than Rs. 10,000.
Tip for Women
Find out about life insurance policies that let you nominate your parents as beneficiaries (not all do). If you are a working woman with no dependents or a husband who earns himself, then it makes sense for you to insure an income for your parents, if they depend on you financially.