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How much Cover should I take in a term plan? | FAQ #31
Dec 01, 2017 | 322 VIEWS
While there are a few standard ways which are used to arrive at the number, here is what I think you should do. Ask yourself, this question... 

“In case something happens to you, how much money is sufficient for your family to lie a decent life?”

If that money is put into a fixed deposit, there should be enough income for them to lead a decent life. That should give you the answer.

Of course, it gets complicated with some loans which you have, parental support and some savings which would have. But you still should be able to arrive at a number. That is the amount of life insurance cover that you should have.

Term insurance plans are now are really affordable and that makes our life a bit easier. Ideally go in for anywhere between 20 to 25 times your annual income as the cover amount. So if you have a 10 lakhs annual salary package, go in for a cover of 2 crores. In case something happens to you, your family will get 20 crores which put into an FD @ 8% will give them an annual income of around 16 lakhs. You should assume that rate of interest may not always be 8% and will swing lower at times. Plus there are little chances of this money being put into even slightly riskier products to generate greater rates of return.

A 30 year old can get a 2 crore cover for 30 years by paying anywhere between 15 to Rs. 14,000 to 20,000 in a year. That investment is well worth it in my opinion - completely secures your family’s future.

As your income grows, you can periodically look at increasing the cover amount. Feeling a bit convinced? Take the first step - compare term insurance plans available in the market. 

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