Have you computed the term plan money correctly?
When buying the term plan, you might end up settling for a sum assured amount that does not meet future expectations. We tell you how to set this anomaly right.
There is nothing more important than financial security, especially in troubled times. You are able to face the toughest challenges in life, but things can reach a head if your finances are insufficient. What’s more, whether you have a hefty bank balance or not, you must still finance important things like children’s education, various loans, etc.
The problem is compounded if you, as the sole earning member of the family, are suddenly absent. Faced with a loss of income, your family might need to compromise on several fronts. However, this problem is deftly handled by means of buying a term plan.
How to compute the term plan’s sum assured
The sum assured is the amount of money that the policy pays on maturity or termination. In the case of the term insurance plan, the sum assured is paid to the policy holder’s family members after the former’s untimely demise while the plan is still active.
Please note that there is no maturity benefit ingrained in the term policy. Thus, the sum assured is not paid to the policy holder at any point in time. If you outlive the plan tenure, the policy is terminated at that point.
The sum assured amount must take care of the future needs of your loved ones. Do use a term policy calculator to include sums of money that account for:
- Daily and yearly household expenditure
- Children’s education
- Children’s wedding expenses
- Unpaid debts or loans
- Maintenance of assets like car, second property, etc.
- Spousal support
- Emergency expenses
Add up these amounts of money and multiply by 10 or 12. Now factor in future inflation. The final tally is the sum assured on the term policy. We recommend using a term policy premium calculator as well to find out the premiums payable every year.
How the term plan money helps…
The term insurance corpus helps your loved ones manage their finances in the face of a lost income. In your absence, the term policy money can finance your loved ones’ dreams and help them maintain the standard of living that they are accustomed to.
Too often, lack of financial planning and insufficient finances can result in financial peril for your loved ones. You might believe that your savings and investments can help your family in your absence. But the money soon runs out, and your loved ones are faced with several financial challenges.
However, the term insurance plan money comes in handy during such times. Even with the stoppage of the family income, it can help your loved ones manage the home, pay off unpaid debts, finance children’s education, and so on.
