Short Term Disability Insurance - Short term disability insurance is a type of insurance plan designed to compensate for the lost income due to a disability
Buy a term plan and secure your family
We spend a lot of our time in understanding the various kinds of insurance plans offered by the insurance providers. Although understanding different life insurance plans before buying one is a good practice; however, you also need to focus on the amount that you should be investing.
While planning for any kind of financial investment, the first and the foremost thing you should do is understand what your requirements are. Then, you can select the most ideal option from the various plans available in the market. But a lot of you end up leaving this important first step, which is analyzing the requirement first, heading directly to the policy types in the market.
While calculating your insurance needs, some people only give attention to the HLV method or the Human Life Value method. This method only involves the amount of income you earn, hence making it an incomplete way to calculate the insurance needs.
The kind of options included in the HLV method will lead to an incomplete and inappropriate estimation in the long-term. For instance, HLV will consider the salary drawn today as a reference for your future necessities. It ignores the aspects of emergencies in the future such as loss of employment, accidents, illness, and more. Hence, you will not get the correct estimate for your insurance needs that you and your loved ones need.
In case you are looking for life insurance plans, typically it is done for making sure that your family is financially stable and self-reliant with sufficient funds for clearing the debts and meeting their daily expenses.
After the policyholder passes away, the expenses may shoot up (especially if he or she was the sole breadwinner for the family). These expenses may include, monthly expenditure, education, medical expenses, loan settlements, and more, which require due importance. One essential thing to consider is the rate of inflation.
Therefore, it is important to consider factors that may affect your family’s future, and these should be linked to the kind of insurance you wish to buy.
Considering as well as using an anticipated approach while calculating your insurance requirements for the future is the correct way for giving you a better and realistic estimate of what will suit your family’s needs. Further, this will help you in deciding the amount of insurance required by you and your family.
Now that we have discussed the things you need to focus on while estimating your insurance requirement, it is time for a rundown on some basic rules for deciding the amount of insurance.
At the time of calculating your insurance requirements, you need to consider the monthly income or expenses that your family may need after your demise. It is necessary to keep in mind the lifestyle, education expenses, and household requirements that your family may encounter in the future. It makes sense to include liabilities such as loans and other debts so that they can also be covered. Most importantly, do not forget to keep margins for inflation as well.
Before investing your hard-earned dirhams in life insurance plans, the first rule is to make sure that your sum assured must be adequate enough to fulfill the financial needs of your family. Apart from that, it should also be able to clear the liabilities your family owe. While doing your insurance calculations, it is recommended that you get a coverage amount that is 10-12 times above your current annual income.
By keeping these two important rules in your head at the time of deciding the amount of insurance you require for your family, you will be good to go. The insurance cover is also dependent on how many dependents you have in the family.
For instance, if you have kids then education expenses will be involved and even higher education expenses at that. You must also focus on rising education cost. The expenses applicable to education today will definitely not be the same after a few years’ time. You may want to think about their wedding expenses as well.
Other commitments like these need to be taken care of before buying a life insurance policy. Considering all such expenses will provide you with an estimate of the amount you should be investing in and the duration for which you can invest.
In case you have planned of investing in insurance sometime later in your life, your premium amount will rise. Therefore, it is recommended that you invest in a suitable insurance policy at the beginning of your professional life.