How Much Life Insurance Is Adequate For You? Here is Step-By-Step Method To Calculate

<p><strong>New Delhi:</strong> With the second wave of deadly coronavirus taking many of our loved ones in its clutches, it&rsquo;s time to prioritise our financial lives and find ways to secure those who are left behind. One of the many components of financial planning is to take an adequate amount of life insurance cover. The pandemic has shown us how viral disease can be cruel to us. Hence it&rsquo;s always better to be prepared for any eventuality and secure our financial lives as much you can.</p> <p>Life insurance is a crucial component that protects your family in case of any unfortunate event. With adequate life insurance, you can help your family members to take care of regular expenses besides fulfilling other financial goals. In absence of adequate life cover your financial life can become tough, and a lot of people are not aware of how to decide on their life cover.</p> <p><strong>ALSO READ: <a href="https://ift.tt/3eshvWL IPO: Here's What to Consider Before Investing In Online Food Delivery Platform</a></strong></p> <p><strong>Here&rsquo;s what you should keep in mind</strong></p> <p>You need to calculate your insurance needs before you buy a cover. There are different thumb rules to apply to arrive at your insurance requirement. Most of the times, the amount is said to be a multiple of your annual income. However, the income replacement method is considered one of the best ways to arrive at the insurance amount. This method is dependent on current age, retirement age, income, and expected growth in income every year.</p> <p>Firstly, calculate your contribution to the family&rsquo;s monthly household income by deducting personal expenses from your take-home salary.</p> <p>Then find out the total income you will receive till the retirement age for which you need to factor in annual increments as well.</p> <p>You also need to calculate the expected total income generated if this total income is invested in low-risk options for the family to withdraw every month or year.</p> <p>Also, don&rsquo;t forget to add any outstanding loan amount to the insurance cover. It is because the onus of repaying the liability is passed on to family members in the absence of the breadwinner. Lastly, the existing insurance cover and savings/investments get deducted from the above amount to come up with the total insurance cover needed.</p> <p>It is always advised to opt for term insurance and not for any other plan such as endowment or money-back policies, as the purpose of buying insurance is to protect yourself and not to make an investment.</p>

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