Life insurance has been an elusive subject for many. The long-standing perception has been that it is complex, substitutable, and inflexible.
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Life insurance has been an elusive subject for many. The long-standing perception has been that it is complex, substitutable, and inflexible. It was only recently that the masses have realised the need for insurance, as the Covid 19 pandemic has created an unprecedented financial burden on several families. At the core of it, life insurance caters to all your life goals through solutions aimed for protection, savings, investments, and health. It facilitates financial independence so that your future life goals can be achieved successfully. A prominent part of life insurance solutions is the element of mortality, which allows you to secure your loved ones from any financial disruption resulting from events like job loss, disability, and death.
I always recommend buying an insurance plan as soon as one has started their first job. Apart from the protection aspect, insurance also helps instil a habit of saving from an early age, which makes way for prudent financial practices in the longer term. There are various factors that contribute to the decision-making process. Insurance should be looked at holistically, as a part of the financial planning process. When determining the right product for yourself, first map out the life goals you are planning for and then look at the various products available at your disposal. Unless your life insurance solution is linked to a financial goal, you wont be able to determine the right product for yourself.
How does one determine if they need insurance and adequate coverage?
Term insurance is the purest form of protection and anyone who has dependents must opt for it. Several factors go into consideration when buying term insurance including income, expenses, liabilities, inflation rate, etc. There are tools available online that can help you determine adequate coverage for you, depending on your unique requirements.
The general thumb rule is that the life cover must be at least 10 times of your current income and additionally account for liabilities so as to get adequate income replacement. As your liabilities increase, your cover should increase too.