I’m single with no dependents, then why do I need life insurance? Am I old enough to start thinking about life insurance? How much will a life insurance policy cost me? Will it be too expensive? I don’t earn enough, should I still buy a policy?
These are questions often asked by people who think life insurance is something they should consider only when they get old. That’s a myth.
Buying life insurance is one of the most important financial decisions you can make so don’t stay away imagining you would have to dish out some large amount for safeguarding your future. No matter how much you earn you can find a policy that fulfills your requirements.
The question here is not how much you will need, but how much your family will need when you are no longer around and how much they will need to sustain the household.
The best way to do this is to use a life insurance calculator. To give you a clear idea how it works, let’s consider a few scenarios:
1) You’re a 27-year-old single woman with no children and no dependents
You have no loans (for example home loan, vehicle loan, personal loan, etc.) and you have savings of Rs.15 lakhs, which includes all your investments. Your monthly income is Rs. 75,000 and your monthly expenses are Rs. 30,000, which includes food, rent, transportation cost, etc. The calculator will also ask you to enter the age at which you expect to retire. Let’s say you want to retire at 65.
In your case, you do not need any additional insurance today but in the future if you do plan to have a spouse or kids you will need an insurance of Rs.2.71 crores to replace your income.
If you do decide to opt for a life cover of Rs. 2.71 crores with a policy term of say 20 years then your annual premium would be approximately Rs. 14,225. If you choose to make regular payments on a monthly basis, then your monthly premium could be as low as Rs. 1,185.
2) You’re a single 30-year-old woman with savings of Rs. 25 lakhs and no loans
And, your monthly income is Rs. 1 lakh and your monthly expense is Rs. 45,000. You also plan to retire at 65 but you have a life insurance cover at present totaling Rs. 20 lakhs.
In this instance, though you won’t need additional cover today in the future you will need to take insurance worth 2.91 crores to replace your income.
3) You’re a 39-year-old man with a wife and one son
Let’s assume you’re the sole breadwinner in your family. Your son is five years old and you have no dependents. You hope to spend Rs. 30 lakhs on your son’s college education and Rs. 20 lakhs on his wedding. You currently have a home loan of Rs. 25 lakhs and you have savings of Rs. 50 lakhs. Your monthly income is Rs. 2 lakhs and your monthly expenses are Rs. 1 lakh.
Since you already have a total life cover of Rs. 6 lakhs you will need to take an additional insurance of Rs. 3.38 crores to cover your loan and expenses and meet long-term goals. Since you’re already 39, you shouldn’t delay buying insurance because premiums shoot up as you get older.
For a life cover of approximately Rs. 3.4 crores, your annual premium could be as low as Rs. 17,526 (monthly around Rs. 1460) which is great value for securing your loved ones’ future.
When should you buy life insurance?
The sooner you buy an insurance policy, the lesser your premium is likely to be. For instance, let’s say you are in the market for a Term Insurance Plan. Using this calculator, we discover that if you are a 30-year-old non-smoker woman who wants insurance cover of Rs. 1 crore, you will be liable to pay Rs. 7,360 as annual premium for 25 years. But if you are a 35-year-old woman, keeping everything else the same, you will have to pay Rs. 9.660 per year. So why wait and pay extra?
Your life insurance cover should account for financial goals, including a child’s higher education and marriage. By taking a low life cover today you are impacting your family’s future and goal.
A life insurance cover should be big enough to generate income, which can take care of your family till they become self-sufficient.
* Disclaimer: The premium mentioned above are for non-smokers and are indicative in nature. The premium amounts will vary from person to person.
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