Life is unpredictable; who knows what is going to happen next? We might be stuck with a disease or disability or even death. Although we cannot define the value of life, the loss of income, over the years can be vaguely determined. Life insurance offers a toll that offers covers such contingencies. The Sum Assured (the amount guaranteed to be paid in case of an unfortunate event) offers monetary assurance to near and dear ones.
Most of us do not consider buying life insurance, and we consider it only after pushy salesperson puts it under our nose? While maybe the latter is true, but there are several reasons why you should buy life insurance.
To Pay Final Expenses:
In India, marriage and death demand major expenses. The cost of your final rites can run into thousands, and you would not want to burden your spouse, children or parents with the same as they are already suffering emotionally. Taking insurance takes care of these unforeseen expenses.
To take care of Children’s Education:
All parents want to ensure that their child enjoys a quality education. Now imagine a scenario where your child has secured admission in a good college, but you are unable to afford the tuition fees due to loss of income. For this very reason, it is essential that you take life insurance so that your kids are covered even when you are not there anymore.
To Replace the Income:
Our income is contributed to various things- saving, paying bills, and maintaining our lifestyle. If one of the spouses is removed from the picture, things often go haywire. If the earning member dies, there is no income to support the family. If the nonearning member dies like a housewife, then you’re your expenses might go up because you may need to hire help to take care of the kitchen, laundry, kids, etc. and so your income again may be affected.
To Pay Off Debts:
Many people take a home loan or personal loans, and in the case of untimely death, the whole burden will fall on the grieving family. However, life insurance offers cover against debts like the mortgage so that the family does not have to sell assets to stay solvent.
Do you need life insurance?
Typically, anyone who is earning and has to take care of dependents should take a life cover. So, even if you are not actively contributing to household expenses, but your income goes into savings, even then you need life insurance. Taking life insurance protects your future potential income.
How much insurance do I need?
The amount of premium that you should pay should take into consideration the following factors
- Number of dependents
- Future expenses
- Current affordability
- Investment needs
- Lifestyle needs
The claim amount should be enough to replace the amount you would have earned if you would have lived a full life. Having said this, we also want you to consider the amount you can afford to contribute towards annual premiums for that amount. In short the amount received should be equal to the amount you should have earned after tax if you would have been working until retirement.
This amount will allow your family to maintain their current lifestyle even after your untimely death. Many times people do buy life insurances, but they do not buy enough to cover family expenses for the rest of their life span. It is therefore important that you take into consideration all the above factors before you decide upon your premium amount.
The conclusion:
Many people believe that taking a life insurance is a waste of money as the money for premiums is of no use if death doesn’t happen during the coverage time. However, life events cannot be predicted and it is always better to be safe than sorry.