Financial protection from various life risks is a must in today’s changing times. As they are unpredictable and can cause considerable trauma, it is better to be prepared for them with sufficient financial assistance. This assistance can be gained from a life insurance policy. With different policies available in the market today for you to choose from, it is easier to get confused. More importantly, which policy would provide you the required cover as per your needs, is a factor that cannot be overlooked. If you are planning on purchasing a policy and are confused about how to find the right cover amount, read on to know more.
What is life insurance?
A life insurance policy is a type of policy in which the insurer provides monetary compensation to the beneficiaries of the policyholder. If the insured passes away during the term of the policy, the insurer will provide a death benefit to the beneficiary. This amount will help them cover the vital expenses of daily life while securing a safe future for themselves. Different life insurance policies provide different benefits as per the requirements of the customer.
What is life cover?
When a person purchases life insurance, there is an agreement between the insurer and the insured. As per this agreement, the insurer will compensate the family of the insured in the event of their untimely demise. This compensation amount is what is known as life cover. The type of policy you buy and what you pay decide the cover amount of the policy. You can either go for a lower cover or a higher cover based on your needs.
How to decide the right cover amount?
Listed below are a few tips that can help you decide the right cover amount for you:
- Compare insurers
With people opting to buy life insurance for themselves online, it has become easier to compare different types of insurers and their products. There are many websites that help you in comparing insurers. Factors such as pricing, claim settlement records, service and customer satisfaction are used for comparison. This is beneficial for first-time buyers as they would get to see first-hand which insurer is better than other.
- Talk to real customers
It is always better to connect with people who own life insurance. These people could include your friends, your colleagues or even your relatives. Talking with them would give you an insight about which insurer they prefer and how their services are. While agents are usually the experts, remember that the real benefit is received by the policyholder. So, establishing contact with existing customers can help you.
- Based on your requirements
When looking to buy life insurance, you will notice that you can opt for a policy that offers a higher cover amount as well. However, higher the cover amount, higher the premium. Always get a clarity on what your goals and future requirements are. If you do not have massive expenses lined up in the future, you should opt for a medium cover amount. If you want to secure the financial future of your children or any dependents in your absence, go for a higher cover amount. Never burden your current expenses as it could cause financial problems later.
- The cost of the insurance
While requirements do matter, so does the cost of the policy. As mentioned earlier, the cover amount increases or decreases the premium. This means that you will have to manage your regular expenses accordingly. If you have any upcoming medical procedure, most of your savings will be spent for the same. This means that you could be left with little money for premiums. Always take into account how much the policy would cost, compared to what your earning are.
- Take your future into consideration
When you bought your policy, you were single with no dependents relying upon you. However, this could change after marriage, as your wife and children would be the dependents. Similarly, if you made a big purchase with the help of a loan, the repayment would fall on your parents or spouse in your absence. All this could lead you to change the type of policy you own. So always plan and buy.
The above tips should be kept in mind before making a purchase. You could also take the assistance of the life insurance calculator to determine the cost and the cover amount of the policy.
