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By the time you hit the 30s, chances are you are married, have kids, own a house, at least a car and plenty of bills to pay. Overall, your responsibilities grow tenfold as you now a family of your own to support and nurture. In your 30s; therefore, you need to start with financial planning (if you haven’t started yet) and take steps to protect your loved ones against any unexpected life situations.
Life insurance becomes more crucial than ever, given the fact that you have several financial responsibilities. Even if you have a life insurance plan in place or are covered through your employer, you need to assess if your insurance cover is adequate to support your family’s financial future.
Ideally, your term plan insurance cover must be at least ten times your annual income. In case you have a spouse and children to support, your term plan insurance coverage can go higher.
If you are in your 30s and need to figure out the appropriate term insurance cover for yourself, here’s how you should proceed.
How Much Should You Invest in your Term Life Insurance?
While many of us postpose buying a term insurance plan in our 20s, we cannot do the same when we reach the 30s. You need to have a term policy in place, and for that, first, you need to assess what will an ideal cover amount for you?
Your term plan insurance cover should be large enough to substitute your total net future income, for both personal consumptions and your family’s usage.
One way to determine an ideal amount is the income replacement method, in which you multiply your current annual income with the total number of years left before retirement. For example, if you are a 35-year-old male with a yearly salary of Rs 10 lakh, you will require a term insurance cover of Rs 2.5 crore (Rs 10 lakh x 25 years left for retirement at 60). A rule of thumb says that your life cover should be at least 15 to 20 times your annual income, before the age of 40 and then between 10 to 15 times after that.
However, if you have financial liabilities, such as home loans, or specific financial goals to accomplish, you need to increase your insurance cover accordingly. Form the above example, if the 35-year-old male is planning to take a Rs 20 lakh loan to purchase a car and save another Rs 20 lakh for supporting his child’s higher education, he needs to add another Rs 40 lakh to his coverage estimate of Rs 2.5 crore.
Factor-in Inflation While Determining Your Insurance Cover
According to experts, inflation is a crucial factor that may play spoilsport in your financial planning for the future, especially your term plan insurance cover. With the prices continually increasing, you need to make sure that you account for inflation while determining your term life cover.
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For example, a term plan insurance life cover of Rs. Fifty lakhs may appear significant today; however, at an assumed inflation rate of 6% say 20 years down the line, the same amount will not be sufficient to support your family’s lifestyle and life goals. A possible approach here will be to opt for a maximal coverage amount, for which you can afford to pay the premium for the pre-selected premium payment tenure.
Periodically Review Your Life Insurance Cover
Purchasing term plan insurance is a life-long commitment, meaning that you need to make sure that your insurance coverage stays relevant and aligns with your changing life goals.
Also, you can enhance your term plan insurance coverage with additional rider options including waiver of premium, accidental death/disability cover and critical illness benefit, over and above your term plan insurance by paying an additional premium
Term Life Insurance is An Integral Part of Your Financial Planning
In your 30s, life throws many curveballs at you in the form of responsibilities for your family. Thus, it is crucial that you keep up with the changing needs and invest in the right insurance plan. Max Life term Insurance plan provides you with life coverage for an affordable premium amount so that you can financially secure significant life changes such as marriage, children’s education, and buying a home.
These insurance plans help you save up a nest egg for your family and yourself while offering several benefits such as comprehensive tax savings and security against any potential loss of income due to an accident, along with the insurance benefit.
That being said, purchasing term plan insurance coverage is relatively cheaper in your 30s than say your 40s or 50s. Therefore, you need to buy a term plan, preferably in your 30s so that you can lock-in an affordable rate of premium for the rest of your life.
ARN:- 17102019/KC2
