Even before you start your search for term insurance plans, it is vital to have a clear vision of the insurance coverage amount you need. The death benefit, which is payable under the term plan, must be enough for covering all the needs of your family for an extended span of time. It is only up to you for deciding the amount you want the term insurance to cover. For calculating the right amount, there are some significant methods to follow. So, without wasting time, let’s find out more about those methods first.
Income replacement method:
If you want to calculate the term insurance amount with the help of the Income replacement method, then you first have to multiply your annual income by the number of years left for retirement.
- This method helps in highlighting the amount of term insurance, which is enough for compensating for your current lost income if you fail to earn for your family.
- Based on that calculative measure, you need to focus on the amount under the term insurance policy. Don’t forget to check out the premiums and see if you can pay that premium easily on time without hampering your monthly family expenditure.
The Human Life Value or the HLV method:
Just to find out the amount you need through the HLV method, you better start calculating the total economic value of any individual. For that, you have to check out his life count. For that calculation, there are certain points to keep in mind. Those are:
- Expected future goals along with the financial responsibilities of each and every dependent
- The number of dependants that you have and how much amount you are planning to chalk out for them
- Any existing debts or loans that you need to focus on primarily
- The annual or monthly expenditure you are currently earning
After finding these amounts, you have to add these figures and then multiply the total amount with an inflation rate of 20 to 30 years in the future. The final result will be the term insurance amount you need for covering your family’s economic condition when you are not around.
Expense replacement method:
Here, this method will follow the same steps as mentioned in the Human Life Value method, but for the first step. Once you have come across the total value, it is time to add the sum of all your investments and the available financial assets. Then you have to deduct the sum from the value that you get by following the HLV method. It is going to be that term insurance amount you need to focus on!
Buy an insurance plan right away!
Using a few simple steps, now you get to buy term insurance plans right on time. The reputed companies will offer a wide range of term insurance plans for marching your diverse palette needs. Visit the official website and then click on the insurance plans. Check out the packages available, and then you can select the term that suits your needs the most.