Term insurance coverage can differ for different people depending on their income, lifestyle, expenses, loans, and more. If you are under the age of 55, you should take a cover that is approximately 10 to 12 times your gross annual income¹. Such a sum can be adequate to meet future needs and counter inflation.

What is the meaning of term insurance coverage?

Term insurance coverage refers to the sum assured that will be payable to the nominee in an unfortunate event with the Life Assured during the policy term. It also includes any additional add-on benefit, such as accidental death benefit^{^} that can increase the payout given to the family members.

How does term insurance coverage work for an individual?

Here’s an example to show you how term insurance coverage works for an individual:

For instance, your current salary is ₹ 10,00,000 per annum. In order to ensure that your family is well taken care of in your absence, you can consider a sum that is 10 times your current salary, i.e., ₹ 1 crore. In case of an unfortunate event during the policy term, your loved ones will be given a death benefit amounting to ₹ 1 crore. This payout received will be tax-exempt^$ subject to conditions under Section 10(10D) of the Income Tax Act, 1961.

If you have added a rider, such as the accidental death benefit^{^}, your family will also receive an additional payout over and above the sum assured.

Points to note while calculating your term insurance cover:

• Calculate your monthly expenses -

  Take into account all your expenses to ascertain how much cover you need. This should include your grocery bills, electricity and water bills, fuel expenses, rent, clothes, and other expenses

• Analyse your liabilities -

  Cover all your loan liabilities and do not let the burden fall on your family after you. Hence, you must factor in any outstanding debt, such as loans, credit card payments, or any other dues and then pick a suitable cover

• Consider your life and financial goals -

  Financial goals like saving for a child’s higher education or marriage can require significant savings. Buying adequate term insurance can help your loved ones continue with this goal in your absence in case of an unfortunate event.

• Tenure of your policy -

  You can have different responsibilities at different stages of life. For instance, at the age of 25, you are likely to be single with few responsibilities responsibilities but at the age of 40, you may have a spouse and a child. Your age and lifestage can affect the tenure and coverage of your policy.

Conclusion

It is important to carefully select a term insurance cover as your decision can greatly impact the life of the nominee. Moreover, you must also pay attention to adding the right riders as they can help you in your hour of need.

ICICI Pru iProtect Smart Plan offers a life cover^` of ₹ 1 crore at affordable premium rates. The plan also lets you add optional add-on benefits, such as a critical illness benefit^**, an accidental death benefit^{^}, and an in-built waiver of premium benefit in case of permanent disability^~, to enhance your coverage. So, go ahead and invest in the plan to secure your future and provide for your family.