How to get a Higher Term Insurance Coverage Beyond the Eligible Amount?

In the realm of financial planning, ensuring the well-being of your loved ones is of paramount importance. Term insurance is a powerful tool that provides financial protection in case of your untimely demise. But what if the eligible coverage amount falls short of your family's needs? This blog will guide you through strategies to obtain a higher coverage sum assured, safeguarding your family's future without compromising on quality or authenticity.

What is the importance of adequate coverage in Term Insurance?

Before we delve into the methods to boost your coverage, let's revisit the significance of adequate coverage. Term insurance serves as a safety net, replacing your income and covering financial obligations after your passing. It ensures your family's financial stability, allowing them to maintain their lifestyle, pay off debts, and achieve their goals.

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What are the methods to boost your coverage?

1. Accurate Assessment of Your Needs:

The foundation of securing an appropriate coverage sum assured begins with a thorough evaluation of your financial situation. Take into account various factors, including:

• Existing Savings and Investments: Deduct the value of your savings, investments, and other insurance policies from your total financial obligations. Say if your savings and investments amount to ₹5,00,000, subtract this from your total obligations.
• Basic Living Expenses: Calculate the monthly expenses required for your family's sustenance, such as housing, utilities, groceries, and healthcare. For example, if your monthly expenses are ₹40,000, that's ₹4,80,000 annually.
• Major Financial Goals: Consider significant future expenses, such as children's education, weddings, or buying a home. Let's say your child's education is estimated to cost ₹10,00,000.
• Outstanding Liabilities: Include any outstanding loans or debts, like mortgages, car loans, or personal loans. If you have a mortgage balance of ₹20,00,000, include this in your calculations.
  

Now, let's assume your total financial obligations are ₹4,80,000 (living expenses) + ₹10,00,000 (education) + ₹20,00,000 (mortgage) - ₹5,00,000 (savings) = ₹29,80,000.

2. Check Your Eligibility:

Insurance companies determine your maximum term insurance coverage based on factors like age, occupation, health, and existing policies. Your annual income is a crucial factor in this calculation. If your annual income is ₹6,00,000, and the insurer might offer coverage up to 15 times your income, your maximum eligible coverage is ₹90,00,000(approx)

3. Explore Riders:

Riders are additional policy features that can enhance your coverage. Consider an Accidental Death Benefit Rider, which provides an extra payout in case of accidental death. Let's say your base coverage is ₹1,00,00,000, and you add an accidental death rider for an additional ₹50,00,000. In case of accidental death, your family would receive a total of ₹1,50,00,000.

4. Build a Supplementary Corpus:

If your eligibility doesn't match your calculated needs, consider building an additional financial safety net through investments or savings. These funds can cover the shortfall in your insurance coverage. For example, if your calculated coverage need is ₹1,50,00,000, but you're eligible for only ₹1,00,00,000, work towards accumulating the additional ₹50,00,000 through savings or investments.

5. Utilise Increasing Cover Features:

One effective strategy is to opt for policies with increasing coverage features. These plans automatically raise the sum assured at regular intervals during the policy term, ensuring your coverage keeps pace with inflation and growing financial responsibilities. For instance, you start with a base coverage of ₹50,00,000, and it increases by 5% each year. After 10 years, your coverage would be approximately ₹82,29,526.

6. Professional Guidance:

Consulting a financial advisor or insurance advisor can be invaluable. They can help you navigate complex policies, understand your specific needs, and find the best-suited coverage for your family.

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Conclusion:
Obtaining higher coverage than your eligibility may seem challenging, but with careful planning and consideration of these strategies, you can secure a comprehensive term insurance policy that truly safeguards your family's future. Remember, it's not about the size of the coverage alone; it's about ensuring your loved ones are well taken care of, no matter what life brings.

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