RESUME APPLICATION PAY PREMIUM
Fund Performance

Fund Performance

Knowledge Center

Knowledge Center

About Us

About Us

Tools and Calculators

Tools & Calculators

Quick links

Mobile (Download app)
  • Webpages
  • Documents
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment
  • HDFC Life ClassicAssure PlusInvestment

For NRI Customers

(To Buy a Policy)

(If you're our existing customer)

For Online Policy Purchase

(New and Ongoing Applications)

Branch Locator

For Existing Customers

(Issued Policy)

Fund Performance Check

RESUME APPLICATION PAY PREMIUM

What do you want to do?

Quick links

Mobile (Download app)

Download HDFC Life App

Buy plans, track your policy, make renewal payments & monitor fund performance with HDFC Life App, Download Now!

Apple Logo Go to Google Play Store

Minimum sum assured for a term plan: What to consider

down-arrow
Minimum sum assured for a term plan
November 03, 2023

Table of Content

 

While creating a financial plan for the future, many people may opt for term insurance. A term plan offers life cover to the policyholder for a certain period. If anything untoward happens to them during the policy term, their nominee receives the sum assured amount. The main objective of a term plan is to provide the individual’s family with financial stability when they need it the most. To ensure your family is well taken care of, you must select the right sum assured for your term insurance policy. 

Factors to Consider

To understand the minimum sum assured you need to opt for, you must consider these crucial factors:

  • Everyday Expenses

    The payout from the term plan will be used to help your family deal with their day-to-day expenses. A good rule of thumb is to opt for a sum assured amount that is at least 15 times your current income. If you can pay higher premiums, opt for an amount that is 20 times your income instead. You also need to factor in your liabilities. How many people depend on you financially? Do you have any outstanding loans that others might have to take care of for you? The answers to these questions will impact your sum assured amount.

  • Expected Inflation

    India is known for experiencing high rates of inflation. The actual value of money decreases every day. Your term plan provides financial stability in the future. So, you need to make sure that your sum assured is inflation-proof. Use current inflation trends to understand what your family’s expenses will likely be in 15 or 20 years. You can then opt for a term policy that offers the required protection.

  • Existing Debts, Liabilities and Assets

    Along with your term plan, you must have made other investments. Think about what kind of returns your family will earn from them. You need to balance your investment returns against your debts and liabilities. By doing this, you will receive an overview of what your family may need in the future.

  • Future Expenses

    While calculating the minimum sum assured, it’s a good idea to add potential large one-time expenses to your assumptions. For example, you may want to opt for a sum assured that could also help pay for your child’s higher education or their wedding. You might want to opt for an amount that will allow your family to put a down payment on a home while still maintaining their standard of living.

  • Retirement Funds

    Most often, people worry about securing finances for their retirement. We’re sure you want to secure your spouse’s golden years even if you aren’t there with them. You can opt for a higher sum assured amount that will help your spouse with their retirement plan as well.

  • Additional Riders

    While your term plan offers life cover, you can opt for riders to enhance your policy. You can choose to add a critical illness insurance that provides you with a payment if you are diagnosed with a covered critical illness. Additionally, you can opt for an accidental death add-on. If the insured passes away due to an accident, the nominee receives an additional benefit along with the sum assured amount.

Finding the Right Plan for Your Needs

Once you’ve considered these vital factors, you can look for plans that meet your requirements. While browsing for plans, you should check:

  • The Sum Assured Amount

    Remember, you need to opt for a plan that will provide you with the payout your family needs.

  • The Premium

    There is a lot of competition in the insurance market today. So, you should look around for a term insurance policy that offers you the coverage you want at an affordable cost.

  • Available Rider

    If you’d like to opt for riders with your policy, make sure your insurance provider offers them. Not all term insurance plans come with the same add-ons. So, look at all your options before you finally decide.

Benefits of Term Plans

  • Financial Stability

    Nobody knows what life has in store for them. An accident could take you away from your family. A term plan allows you to provide your family with financial stability no matter what happens.

  • Customised Cover

    You can pick a term insurance plan based on your specific needs and requirements. You can opt for a sum assured that works for you and even get add-ons and riders to bump up your cover.

  • Pick Your Payout

    Term plan policyholders have the unique ability to decide how they want their nominee to receive the payout. You can opt to have the money provided as a single, lump-sum payout. Or, you can ask your insurer to provide your family with monthly or annual payouts. You should base your decision on your family’s financial needs.

    Purchasing a term plan can often seem complicated. But once you understand the minimum sum assured your family needs, you can find a plan that meets your requirements.

Related Articles

ARN -  ED/10/23/5706

Term Plan Articles Term Plan Articles

Investment Articles Investment Articles

Savings Articles Savings Articles

Life Insurance Articles Life Insurance Articles

Tax Articles Tax Articles

Retirement Articles Retirement Articles

ULIP Articles ULIP Articles

Health Plans Articles Health Plans Articles

Child Plans Articles Child Plans Articles

Popular Calculators Popular Calculators

Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

LinkedIn profile
Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

LinkedIn profile
Reviewed By Reviewed By:

Here's all you should know about life insurance.

We help you to make informed insurance decisions for a lifetime.

4 Common Mistakes to Avoid When Planning to Buy Term Insurance

4 Common Mistakes to Avoid When Planning to Buy Term Insurance

Term Insurance is the kind of life insurance that gives you coverage for a specified period. Here are the mistakes you must avoid while buying a term plan!

What are the documents required to buy term insurance?

Top Secrets to Help You Choose the Best Term Plan

How to Choose the Right Premium and Policy Term for Term Insurance

Essential tips for selecting the right premium and policy term for term insurance. Learn about human life value, cost, riders, and more to secure your familys future.

How to Choose the Right Premium and Policy Term for Term Insurance
Why One Size Doesn't Fit All: The Importance of Customizing Your Term Insurance Coverage Previous
Benefits of Limited Premium Payment Term Plans: A Comprehensive Guide Next
HDFC life
HDFC life

HDFC Life

Reviewed by Life Insurance Experts

HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER

We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.

Popular Search

Popular Searches