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Before purchasing a policy, you should calculate your total liabilities such as EMI for a home loan and other borrowings.

While purchasing an insurance policy, many of us look for one that has lower premium pay out without giving much attention to the extent of protection needed for the family. An insurance buyer should look at the cover as protection and not mainly as an investment. Thus, the cover you buy is not for you but for protecting the family if something unfortunate happens.

Before purchasing a policy, you should calculate your total liabilities such as EMI for a home loan and other borrowings, children education cost and other expenses required to meet the family's needs. Once you evaluate the need, you should buy the best suitable plan having the desired sum assumed to protect your family. However, if you do not have too much of liability, then you need to pay a lesser amount to protect your family financially.

Therefore, the premium payment would also depend on the extend of liabilities to be covered and not just your age.

Term insurance is ideal for financial protection of a family.  As a thumb rule, the sum assured in a term plan should be 10-15 times of your annual income. If you have any liability, say a home loan then you must take into account this liability, and determine a cover which can take care of other expenses, such as children's education, etc, in case of your death during the term period. So, it's clear that if you have liabilities, you will have to go for a bigger sum assured and accordingly your premium will also go up.  Let's take two examples to further elaborate this:

=> Mr A ( 35 Years Old)  is earning Rs. 5 lakhs per annum and has no liability. His family includes him, his wife and two kids. He can easily look at buying Rs. 50 lakhs term cover to safeguard his family from any financial emergency in his absence. The annual premium for Rs. 50 lakhs cover will be between Rs 6000-9000.

=> On the other hand, Mr B ( 35 Years Old) is also earning Rs. 5 lakhs per annum and has a home loan of Rs. 25 lakhs. His family also includes him, his wife and two kids. In this scenario, Mr B would have to take his loan amount into consideration and must buy at least Rs. 75 lakhs cover, so that burden of home loan does not pass on to his family and they can easily manage their household expenses. The premium for Rs. 75 lakhs cover will cost between Rs. 8000-12000, depending on the policy customer chooses.

Hence, it shows that if you reduce your liabilities or set – off the unnecessary debt amount, you will need a lesser cover to protect your family and also need to pay a lesser amount of premium which eventually, will reduce your overall liabilities during working life.