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What is the right amount of life insurance cover for me?

Know more about how much insurance you need under a life insurance policy

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Uncertainties in life can make us think more about the financial security of our loved ones. Life insurance is the first thing that comes to mind to fulfil such needs. The need for buying a suitable life insurance policy has grown further amidst the current COVID-19 pandemic.

While buying a life insurance policy, the selection of adequate life cover is a must. However, many people feel confused about it. You might have heard individuals asking – ‘How much insurance do I need?’

The lack of knowledge about sum assured selection can cause financial hassles in the long run. Hence it is crucial to understand the parameters on which this decision should be based. 

Parameters to Consider Before Selecting Life Insurance Cover 

1. Life Goals 

Most of the big goals in life – yours and that of your loved ones, require adequate financial assistance. For instance, you might have thought of preparing your child to receive higher education abroad. This would require an ample amount to pay for the related educational expenses. In case something happens to you, your children would have to compromise on their educational goals because of financial crunch.

The purpose of buying a suitable life insurance policy is to provide the much-needed financial backup to your family in case of your unexpected demise. The coverage will help them maintain their lifestyle the way they usually do.

Having a list of major life goals handy will give you a better idea of the amount your family would need to fulfil their goals. By factoring in these goals, you can make an informed decision to choose life insurance coverage amount.

If you want to get survival benefits with term insurance, you might also want to know – ‘How much term insurance do I need with the return of premium option?’

Since you will get a survival benefit this way, you can select the life insurance maximum amount based on your life goals. Also, you can get an idea of the premium payable using term plan calculator.

2. Age 

Wondering – ‘how much insurance do I need when I’m young?’ Most life insurance buyers do this while pondering over life insurance maximum amount. The truth is – your age at the time of buying life insurance is a significant parameter that determines sum assured selection.

At different life stages, financial needs change. You might not have many financial liabilities if you are in your 20s. But as your family grows, these liabilities are most likely to grow as well. For example, you might have planned to buy a new home or car in the recent future. A suitable life insurance coverage amount for your family would be the one with which they can maintain their lifestyle as it is.

Another angle to look at the age factor is its impact on the premium for life insurance maximum amount. At a young age, you are eligible to buy an adequate sum assured at low premiums. It is because of the lesser risk of health diseases or similar eventualities. You also get the facility to choose an extended policy period to spread the premium payable, making it affordable to your pocket.

By considering the age aspect carefully, you will better understand how much life insurance do you need.

Also Read: Term Insurance Age Limit

3. Current Financial Liabilities 

Ever wondering why bank officials ask for a nominee when you borrow a loan? They do this to contact the nominee for loan repayment in case something unexpected happens to you.

Now, think of all the assets that you have purchased through loans. Your family would end up bearing the burden of these debts if you won’t be around, which is the last thing you would want to happen.

Even the simplest term insurance can help your family deal with such financial stress. To calculate an adequate life insurance coverage amount, you need to chart out such liabilities. Make a list of all the loans you have borrowed – organised or through money lenders, if any. Then look for different term insurance plans that can provide sufficient coverage at an affordable premium.

All such considerations at the time of buying life insurance can make you live happily, knowing that your loved ones are covered with a backup, and they can fulfil their dreams without any financial barrier.

4. Regular Income 

Whether you are self-employed or salaried, you know how difficult it is to sometimes deal with sudden expenses. For many people, their regular income is just enough to sustain their livelihood, let alone achieving big dreams. Irrespective of how much you earn, you want the best to happen to your family always, which is why buying life insurance is important. 

To the question – ‘How much insurance do I need for my family?’, the simplest answer is to check your income. Next to buying life insurance, you need to pay the premiums on time to keep the policy in force. Your income should support this expense to allow your family to receive life insurance amount in case of an eventuality.

4. Regular Income 

Whether you are self-employed or salaried, you know how difficult it is to sometimes deal with sudden expenses. For many people, their regular income is just enough to sustain their livelihood, let alone achieving big dreams. Irrespective of how much you earn, you want the best to happen to your family always, which is why buying life insurance is important. 

To the question – ‘How much insurance do I need for my family?’, the simplest answer is to check your income. Next to buying life insurance, you need to pay the premiums on time to keep the policy in force. Your income should support this expense to allow your family to receive life insurance amount in case of an eventuality.

 

A better way to look at the right life cover selection is to balance the premium and coverage. The life insurance coverage amount should be enough to support your family financially after you, while its premium fits well into your regular expenses.

It is recommended to have life cover of at least ten times the annual income. While it is a good reference to pick, you should check what suits your profile the most.

5. Estimated Working Years 

Given the work you do; you might have made plans for your retirement. You want to enjoy life after retirement with your spouse, not worrying about the work-related mundane. A crucial aspect of retirement planning is to get done with major financial responsibilities during the working years. The life insurance coverage amount you choose should correspond to a premium that you can easily handle during these years of your life.

By having a fair idea of when you would like to retire, you will have a duration in mind within which you need to plan to pay for various obligations. Life insurance premium payment, which also becomes a responsibility, can be handled within your work life. You can select a limited pay option with your life insurance plan and finish paying the premiums early on while the policy continues till a later age. Similarly, you can plan to get a monthly income and life cover under different life insurance plans.

Tips to Choose Life Insurance Coverage 

Life insurance cover selection is a crucial decision in life. It will have a direct impact on the life of your loved ones. However, it is not the only thing you need to understand while choosing life insurance. Given below are certain tips for selecting the right life insurance coverage:

1. Add riders to your policy 

You can further make the coverage more comprehensive by including riders. Various riders like Max Life Critical Illness & Disability Rider, Max Life Waiver of Premium Plus Rider (WOP), or Max Life Accidental Death and Dismemberment Rider are available to add benefits under specified situations. Make sure you check the rider terms before including them in your policy.

Max Life Critical Illness & Disability Rider (UIN: 104B033V01; Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider)

Max Life Waiver of Premium Plus Rider (UIN: 104B029V04; A Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider)

Max Life Accidental Death and Dismemberment Rider (UIN: 104B027V04; A Non-Linked Non-Participating Individual Pure Risk Premium Health Insurance Rider)

2. Use Life Insurance Calculators 

Before you buy any life insurance plan, use online calculators to estimate the premium payable for a specific life cover. It is quite easy to use them, and you can check how the premium varies with different sum assured, the policy period, payment mode, and payment term.

3. Buy Life Insurance Online 

You can avail many advantages of buying life insurance online, including the ease of comparing different plans, affordable  premiums, and quick policy purchase. You can buy the policy from the comfort of your home or office without having to visit a local agent or insurer’s branch office.

2. Use Life Insurance Calculators 

Before you buy any life insurance plan, use online calculators to estimate the premium payable for a specific life cover. It is quite easy to use them, and you can check how the premium varies with different sum assured, the policy period, payment mode, and payment term.

3. Buy Life Insurance Online 

You can avail many advantages of buying life insurance online, including the ease of comparing different plans, affordable  premiums, and quick policy purchase. You can buy the policy from the comfort of your home or office without having to visit a local agent or insurer’s branch office.

 

Frequently Asked Questions (FAQs) 

Q. How much term insurance do I need at the age of 30? 

A. A specific life insurance coverage may not be suitable for all individuals. Hence, you need to look at various factors like your income, expenses, and liabilities, if any, at the time of selecting term insurance coverage.

Q. Is it advantageous to buy life insurance policies online? 

A. Online life insurance purchase comes with several perks for policy buyers. You can easily look for various policies and their benefits online, match them up with your needs, and then make the buying decision. It also helps save money because of lower premium.

Q. How much life insurance do you need for retirement planning? 

A. If you want to plan for your retirement with a life insurance, you need to choose the one with regular payouts in the later years of life. The coverage depends on the kind of lifestyle you want to live in those years without financial worries.

Q. Is it compulsory to add riders to a life insurance plan? 

A. It is up to you to decide if you want to add riders to your policy for extended benefits. You can check the rider benefits and include them if they fulfil a specific need.

Q. Who will receive the life insurance coverage amount after my death? 

A. The policy nominee or beneficiary you choose while buying the policy will receive the death benefits. 

ARN No : Sept21/Bg/16

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