When deciding on the coverage of a life insurance policy, keep in mind that the purpose is to offer
financial help to your family and dependents if you are unable to work due to a chronic ailment or sickness. To do
so, first determine your financial goals and then estimate the coverage you will need to reach those goals.
However, a lack of understanding of the principles upon which this decision should be based can
result in financial difficulties later in life. As a result, to assist you, below is a list of important aspects
to examine before determining the appropriate amount of life insurance.
Your family’s objectives and costs have a big impact on how much sum insured is needed. The whole
point of insurance is to support your family in sustaining the standard of living you have always provided for
them in the case of an accident. God forbid, if something were to happen, life insurance would assist your family
in meeting their financial obligations, such as paying for higher studies or providing for marriage, both of which
are costly. Your life insurance policy must therefore take inflation into account as well as these potential
The sum assured is significantly influenced by your age when you purchase life insurance. If you
get life insurance when you are young, you may receive a significant amount protected for a small premium. This is
because there is less of a chance for any major illnesses or other such events. Additionally, as we grow, our
financial needs and goals change. You might not have many financial obligations when you’re in your 20s, but as
your family grows, your expenses will probably rise as well. Therefore, getting a sufficient amount of life
insurance for your family will allow you to maintain your existing standard of living.
It is stated that the most important factor to take into account when purchasing life insurance is
your current annual income. The general guideline when choosing life insurance is “10 times the yearly income,”
but today’s strong inflation and skyrocketing living costs necessitate at least 20 times your annual income to
cover your expenses.
It is preferable to have an idea of when you intend to retire. It is recommended that you have a
time frame in mind for which you will need to plan ahead of time in order to pay for specific commitments. Payment
of life insurance premiums, which is also a responsibility, can be done during working hours. You can pick a
limited pay option for your life insurance policy to quit paying premiums early while the coverage continues until
a later age. Thus, with various life insurance plans, you may arrange to get a monthly income as well as life
Another factor to consider before deciding on the sum insured for your life insurance policy is
your financial responsibilities, which might include current loans or debts. Unfortunately, if you die early, your
family may find it difficult to handle your debts or EMIs, as well as household expenditures, especially if you
were the sole earner. As a result, always ensure that your coverage is enough to meet all of your current and
Have you decided to purchase life insurance? Keep the above factors in mind while you determine the
right sum insured. These factors will give you a sense of the average amount you’ll pay for life insurance,
however, it also depends on other factors such as where you live and other personal factors. So, do your analysis
and make an informed decision about purchasing the right sum insured.
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