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Life Insurance Cover: How Much Insurance Do I Need?

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How much insurance do I need? This would most likely be the first question that you would have to address before buying a life insurance policy. When deciding the life insurance cover, you need to consider that this amount would be used to provide financial support to your family in case you’re no longer there to do that yourself. This is why, this amount should be sufficient to support their lifestyle and maintain their standard of living.

To do this, you must start by identifying your financial goals and then estimate the cover that would be required to meet those goals. Sounds confusing? Here are a few factors that you can keep in mind to estimate the right life insurance coverage amount for yourself.

1. Your Present Annual Income

The first critical factor that you should keep in mind while deciding your life insurance cover is your current annual income. While initially it was recommended that your insurance cover should be 10X your annual income, but now due to inflation and the rising cost of living, your insurance cover needs to be even higher.
Suppose your annual income is Rs. 12 Lakhs. Your ideal life insurance cover would be Rs. 2 Crores 40 Lakhs. This amount would be prudent in supporting your family’s annual expenses and maintaining their standard of living in your absence.

2. Your Financial Liabilities

Your current and future monetary liabilities is another factor that plays a role in determining your ideal life insurance cover. These liabilities include outstanding loans, or debts that your family would have to repay in case something were to happen to you. This can be challenging for your family, especially if you are the sole breadwinner in the household. Therefore, it’s vital to account for these liabilities while deciding your life insurance cover.
Aside from these liabilities, you should also account for your liquid or near liquid assets that could help your family cover for these liabilities. These assets could include bank deposits, mutual funds or stocks and can come in handy in catering to financial requirements.

3. Your Financial Goals

Needless to say, your financial goals play a vital role in determining the appropriate life insurance cover for you. The fundamental reason why insurance is needed is for helping your family maintain the standard of living you, as a breadwinner, set for them in case of your early passing.
This includes your children’s higher education, marriage plans, a secure life for your spouse and other such goals. Thus, you should factor in these goals while deciding your life insurance cover.

4. Your Age

The age at which you’re purchasing your life insurance policy can also impact your ideal life insurance cover. This is what also makes it incredibly important to review your life insurance policy regularly.

5. Your Coverage Duration

While deciding your life insurance cover, you must also choose your tenure carefully. You must choose a policy that covers you until an older age and ensures your family is protected under all circumstances.

If you’re still wondering how much life insurance do I need in India, you can also use online life insurance cover calculators to help you get a clear idea of how much life insurance cover you need.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

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