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What determines the premium you need
If you are a member of your family's interests and you have members of your family who are financially dependent on you, life insurance is required. But how much life insurance is needed?
There are many factors relevant in determining the amount of life insurance you need to purchase:
Minimal protection required
Even when that livelihood is not around, it is essential to maintain a certain level of income for the family. Current family needs are 25,000 p. The scope of the income member 's life insurance must be such that the interest income from the guaranteed amount can meet the monthly fee of 25,000 rupees of the family.
If we want the Rupee's purchasing power to decline in the future due to inflation, we must take higher policies. They say that the widow never complains that her husband has bought too much insurance.
Current income level
Payment of insurance premiums will be an outflow of disposable income. Therefore, you may not like to buy so much insurance. You may have to restrict insurance quantity in mind with cash flow issues arising as a result of the periodic payment obligation of insurance premier.
Tax advantage
Also, tax incentives based on Article 80C need to be considered.
Accumulate specific needs
If you are hoping to spend a certain amount for your child's education and / or wedding ceremony, you may purchase a certain amount of insurance contract to meet such temporary promises.
Current age
Your current age is an important factor in determining the amount of insurance you can afford. The premium rate is associated with the advanced age of the guaranteed life. Therefore, you can purchase insurance with the same premium at the age younger than the age.
The final decision carefully takes into account all the above factors and balances. The need for minimal protection may be very high, but the need for current disposable income may not be able to immediately purchase the appropriate insurance.
You must make a compromise and purchase additional insurance when you can afford.
Five easy rules
If unfortunate circumstances occur, fully planned life insurance can protect your family from financial difficulties. However, in most cases, I feel that it is difficult to estimate the correct insurance value that people need.
This is because life insurance needs change at different stages. Young people without dependents may not have much need for life insurance.
As family's responsibilities increase, life insurance needs to increase too much. Therefore, a regular review based on your family situation is necessary to ensure that the coverage is appropriate.
There are several easy ways to widely estimate your life insurance needs. The five simple rules are as follows.
1. Income rule
The most basic rule of thumb is prescribed by the income rule that the cover of an individual's insurance must be at least 8 to 10 times the annual income. For example, those who get the total annual revenue of Rs 1 lakh should have about 8 to 10 lbs in the cover of life insurance.
2. Income plus cost rule
This rule suggests that individuals need insurance equal to the sum of basic costs such as mortgage and car loans, personal debts, child education, as well as five times your total annual income.
3. Insurance premiums on income
With this rule, payment of insurance premium depends on disposable income. In other words, we need to determine the quantum of insurance after protecting the regular outgo from salary.
From the first two rules, you can estimate the minimum necessary insurance extensively. A premium as a percentage of income rules helps fine-tune cash flow by committing the appropriate percentage of income to pay life insurance premiums.
4. Capital fund rule
This rule is Rs 1 lakh pa Assuming you do not have other income generating assets, you can get a capital fund of 12.5 rupees (1.25 million rupees) that you can earn an annual income of 8.5 million rupees (Rs 100,000) I might want to make it. PA Thus, you can purchase a life insurance contract of 12.5 lcs.
5. Approach to Family Needs
This regulation stipulates that you purchase enough life insurance to pay various costs if your family dies. In the family needs approach, family needs must be divided into two major categories. Immediate needs of death (cash needs) and ongoing needs (needs of net income).
Note: Insurance is not an investment It is necessary to always remember that life insurance is protection and not an actual investment. (This also applies to the life insurance part of the ULIP scheme.)
Taking the inflation into account, the real rate of return at that time may also be negative
