Term Life Insurance is the best protection one can offer against untimely death. We all have basic monthly home expenses which includes the Kitchen expenses, loan’s EMI, rent and any other miscellaneous expenses. In the absence of the bread earner the family finds it difficult to maintain the standard of living. The mother may have to leave kids and search for job or if earning may have to reduce the standard of living given by her husband and vice versa. Term Insurance is a protection which the earning members should buy to protect the standard of living of their family.
Three Things Should be in Mind While Purchasing a Term Insurance Plan
- How to Calculate Term Insurance?
- What Should be the Term of Your Insurance?
- Can the Term Policy be Bought under MWP Act?
How to Calculate Term Insurance?
Normally we suggest that you multiply the monthly expenses with 200 to know the amount of term life insurance required to protect the family. This is based on a calculation that if the earning member is replaced by a Fixed Deposit in a bank and gets return @ 6% on a monthly basis, the expenses of the family are taken care.
For eg If you have an expense of Rs 50000 per month, you need a term of 50000* 200, i.e. 1 crores
So, if an untimely death happens family can keep the money in bank and get Rs 50000 every month.
There are many other formulae available like 15- 20 times your annual income.
What Should be the Term of Your Insurance?
We shall suggest that the term should be at least the earning years age 58-60 years but you can have for as long as the company is offering.
Some people may buy term only to cover their home loan or any big loan they have taken and fix the term as the period of loan repayment.
The idea of selecting the term is the duration you have liability and you need protection for the family.
Can the Term Policy be Bought under MWP Act?
Yes, in fact term should be bought under Married Women protection act to protect family against the liability. Policy bought under MWP act cannot be attached by the court.
The Married Women’s Property Act (MWP Act) is an act that states, an Indian married woman’s earnings are her own property. This act mandates that the money received by the wife from the policy is her property and it cannot be used to repay the husband’s liabilities.
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