Saving in a life insurance plan is crucial. But when it comes to buying a life insurance plan, it can be easy to pay too much attention to the premium prices and take a low sum assured to save costs. While affordability is one of the main factors in assessing a life insurance plan, it is also vital to see the bigger picture and not compromise your needs. Opting for a higher sum assured requires paying a little extra premium but guarantee1 insurance and more benefits, ensuring you live an enriching present and future.
A sum assured is the amount of insurance coverage you get after the insurance policy ends. It depends on various factors such as your income, needs, financial liabilities, and future plans and goals. A sum assured can be low (as less than seven times your annual income) or high (as high as 25 times your income).
Getting a high sum assured plan gives you more benefits than a plan with a low sum assured. It might require the payment of extra premiums but as a sum assured is never less than the total premium you pay, you don’t stand any chances of loss. Rather than settling for a low sum assured, it is better to get a high sum assured, as a lesser amount can put your family members at risk of shortage.
There are several reasons why you should opt for a high sum assured:
Inflation: Every few years, the costs of goods and services increase, while the value of money remains the same. These make rising costs of living, especially in urban areas, much higher, and essentials such as healthcare, education, travel, and pretty much anything else, become a costly affair. With a high sum assured, you can negate the effects of inflation. In fact, life insurance plans like the guaranteed 1 return plan ensure your money is safe and growing at the same time.
Protection: Opting for a lower sum assured can leave your family short of funds very soon. Your sum assured should be enough to cover milestones such as your child’s higher education or marriage, your spouse’s retirement, your parents’ healthcare, and the like. Moreover, if you have any unpaid loans, you will also need to secure their repayment so that the strain doesn’t fall on your loved ones in your absence. Getting life insurance plans like the guaranteed 1 return plan will see to it that your family receives guaranteed1 returns in a lump sum or through periodic payouts in your presence and absence, both.
Discounts: Opting for a higher sum assured can make you eligible for discounts on premiums and give that much-needed extra layer of protection. You also get a sum assured rebate (deduction) on the premiums you pay up to ₹1,50,000 a year as per Section 80C of the Income Tax* Act, 1961.
While the general rule of thumb suggests a sum assured between 15 to 25 times your annual income is ideal, it is wise to arrive at an approximate amount based on your existing wealth, income, needs, and liabilities. To do this, you can:
Add up your monthly expense and multiply it by 15, 20, or 25.
Add up an estimated cost of future financial goals such as a child’s education, marriage, a family vacation, a retirement fund, a vehicle, and the like.
Add up the current value of your loans, if any.
Once you add these three, note any existing and future sources of wealth apart from your income, such as investments, real-estate rent, bank deposits, and add it up.
Then subtract it from the value you arrive at after adding step no. 1, 2, and 3.
That way, you will reach an approximate value of how much sum assured you need.
Tata AIA Life Insurance – a pioneer in offering comprehensive yet affordable life insurance solutions – has a guaranteed 1 insurance plan that offers you your money’s worth.
Moreover, guaranteed 1 return plans from Tata AIA is packed with multiple benefits:
The opportunity to grow your wealth and keep it safe at the same time
The dual protection of an insurance policy with guaranteed 1 returns
An assured maturity payout at the end of the plan (which can go up to 10 times the annual premiums you pay)
A death benefit payout in case of your unfortunate demise during the term of the plan
The flexibility to choose to receive the guaranteed 1 returns in a lump-sum or regular income payouts
The option to extend the insurance coverage to your spouse
The liberty to avail a loan against the guaranteed 1 return plan
Enhances protection with a choice of unique health-based riders #
An insurance policy with guaranteed 1 returns is the best of both worlds. With it, you do not have to compromise on your present or future or wait indefinitely to reap your efforts.
L&C/Advt/2023/Mar/1070