How To Calculate Life Insurance Plans In Right Way?

Jul 15, 2018 | 5 months ago | Read Time: 3 minutes | By iKnowledge Team

Calculate Life Insurance Plans

You will come across various articles on life insurance that rationalise the product as a worthy financial investment. You might even compare its benefits with other financial vehicles like ULIPs or ELSS. The salient point of a life insurance product is that it is essentially a safety net; a rational attempt by you to hedge your own mortality against financial security for your family.

Life insurance is a sound investment when planned thoroughly ensuring the right premium cost and withdrawal period. You want to do a lot for your loved ones to make them comfortable. Therefore, an insurance policy that covers unforeseen costs like unpaid bills, personal debts, or outstanding loans is worth every penny you invest today.

Fortunately, insurance today is much more accessible and affordable as compared to the past decade. Insurance Regulatory Development Authority (IRDA), the insurance regulator of the country, in tandem with insurance companies has made stringent regulatory efforts to ensure that an insurance policy is easily accessible. It mandates new insurance plans to provide a higher death cover.

Insurance plans also give the liberty to add various riders to the policy to safeguard against a variety of unique and unexpected circumstances, some of which include critical illnesses, disabilities, and even accidental death. With timely planning and by timing it right, an insurance plan works as an anchor for your future retirement.

Types of life insurance plans can be grouped in 2 main categories:

Term life insurance offers the best financial protection for your loved ones for a specified period of time, usually from 5 to 79 years. The premiums are easily affordable, and the payoff corpus is exemplary. Term policies insure you for as much as Rs 1 crore if you die during the period covered by the policy.

Permanent life insurance, as the name suggests, does not expire. They are intended to financially cover your family permanently, as long as you pay your premiums. Some of these permanent life insurance policies even stockpile cash value. Certain insurance companies provide the option of applying for a loan against these insurance plans.

So how do you calculate the amount a policy will cover you for? The thumb-rule for it is that your insurance plan should value up to at least 10 times your income.

A human life value calculator helps you identify your life insurance needs on basis of income expenses, liabilities, and investments and secure your family’s future. A simple means to explain how this works is by taking Sharma Ji’s example:

Mr Sharma’s current age is a young 30 years and he envisions himself retiring at the age of 60 years. His annual income is Rs. 10, 00,000. Mr Sharma does not consume tobacco but favours occasional drinks with his friends. His investment assets amount up to Rs. 5,00,000 in mutual funds and his savings account holds a value of, Rs. 5,00,000. He does not hold any liabilities in this case and hence, not considered in this calculation.

Mr Sharma’s human life value comes Rs. 25,000,000. The life cover he can expect here is Rs 24,000,000 as calculated on Aegon Life’s human life value calculator tool.

Therefore, by using such tools, you can calculate the cost for your life insurance plans. Regardless of various comparisons available online, Aegon has a diverse range of products which offer the best of all.

Advt. No.: IA/Jul 2018/4175


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