Let us tell you that there is such a powerful formula, through which you can easily find out how much insurance cover you need.
Every day you may get advice about buying an insurance policy through calls, SMS, e-mails. Many people buy the policy even on the advice of the insurance agent. That too when they already have a policy. Later he considers it his mistake. But is there any way to know whether you should take a new insurance policy or the one you already have is enough? Let us tell you that there is such a powerful formula, through which you can easily find out how much insurance cover you need.
On the basis of income (salaried class)
In this way, the sum assured of salaried people can be estimated.
Required cover = Current annual income x remaining age before retirement
IT Professional Lakshya is 30 years old. His annual income is Rs 7 lakh and he has 30 years left for retirement. Accordingly, Lakshya will require an insurance cover of Rs 2.10 crore.
On the basis of expenses (Businessman)
The cover is estimated based on daily expenses and loan. Inflation also has to be taken into account.
Cover Required = Annual Expenses x Policy Term
Rakesh’s annual expenditure is Rs 6 lakh. He wants to take the policy for 30 years. In such a situation, he will need an insurance cover of around Rs 1.80 crore. Expenses will increase due to inflation. Due to which the insurance amount will also have to be increased.
On Value of Human Life (Professionals)
To calculate the insurance cover, you have to subtract your expenses from your income.
Required Cover = Annual Expenses – Own Expenses x Remaining Period in Retirement
30 year old Anand is a doctor by profession. His annual income is Rs 10 lakh. He spends Rs 3 lakh on himself. The economic value of one year is Rs 7 lakh. If the retirement age is 60 years, the value of human life will be Rs 2.1 crore. In such a situation, Anand should take insurance for at least this much cover.
