There are a number of factors to consider when purchasing life insurance, but perhaps the most important question to ask is “how much coverage do I need?” The answer to this question is not always simple, as there are many factors to consider. However, in this blog post we will break down some of the key considerations to help you determine how much life insurance you need.
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
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.
For example- A 30-year old might need a cover of Rs. 1 Crore. If he does not have any health issues, he might get an online term policy for an annual premium of just Rs. 12,000. Whereas, a 40-year old mandates a sum assured of minimum Rs. 2 Crore which might come with an annual policy premium Rs. 18,000. This means that it is best to buy a life insurance policy as early as possible in order to get maximum benefit at minimum cost
Family Structure : Another crucial factor that affects the decision – ‘how much cover do I need’ is family structure i.e., whether you are married or single, have dependent children or not etcetera. Obviously, if you are single with no dependents, your coverage requirements will be lower than someone who is married with children.
Income and Liabilities: Another important consideration is your current income and liabilities. If you have a large income and/or a lot of debt (e.g., a mortgage), then you will likely need more life insurance than someone with a smaller income and no debt.
These are just some of the key considerations to take into account when determining how much life insurance coverage you need. There is no “one size fits all” answer to this question, as everyone’s situation is unique. However, by taking into account factors such as your life goals, age, family structure, and income/liabilities, you can get a better idea of how much coverage you need to protect those who depend on you financially.