In case of demise of the earning member in the family, the dependent members would get endangered because of absence of cash to continue their lives. So, it’s important to take insurance for the earning member of a family having financially dependent members.
By various formulas we can determine how much life cover a person needs. The formulas like human life value and more. By taking adequate life cover you can ensure that the family may maintain the standard of living by investing the received money received from the insurance company.
Basically there are 2 types of insurance plans, one is term insurance plan and the other is endowment plan.
Term Insurance Plan
Term insurance plans are the risky plans where there will be no maturity value and only the nominee receives the money in case of unfortunate death of the life assured.
Whereas the endowment plans, along with the death cover, they also provide maturity value if the life assured survives the full policy term.
The Endowment plans are expensive and a person may prefer to take adequate cover due to high premium, while sufficient cover may be taken through the cheaper term plans.
The reason behind take a life insurance is to replace the loss of earnings due to unfortunate demise of the earning member in the family. The eligibility to apply for the amount of Sum Assured depends on annual earnings and age of the member.
If a 28 years person’s average income of last 3 years is Rs 5 lakh, he may take total life cover of Rs 1.1 crore.
If a 40 years old person last 3 years average annual income of Rs 10 lakh, he can take total life cover of Rs 1.7 crore.
If a person of 50 years, having 3 years average annual income of Rs 20 lakh, then he can take total life cover of Rs 2.4 crore.
A 55 years old person with 3 years average annual income of 25 lakh will be eligible to take total life cover of Rs 2.5 crore.
So, before choosing the insurance policy, keep your age in mind, income and amount of current life cover you have, before applying for additional insurance cover.
If you don’t mention the existing policies, in case of any eventuality the nominee may not get the additional cover claim amount. So, mention the Sum Assured of the existing policies.