Life Insurance – Why & How Much?

February 9, 2011   ·   0 Comments


Lesson 1: – Why & How Much?



Life Insurance is practically a necessity today, but it remains one of the least understood of all financial products.   Let us Try to answer Why & How much is Required as Life Insurance

You Need Life Insurance if

* Your family or other dependents rely on you for financial or other support.
* You Have any loans or debts such as mortgage on the family home.
* You act as a Guarantees on a mortgage for somebody else.

You don’t Need Life Insurance if
* U don’t have family members who depend on your Income.
* Ur company provides a Death In Service Benefit. Generally PSU n various govt. sector provides this option.
* U has investments or property that could provide an income or be sold for cash.
* U r older n you family is grown up, n your spouse is earning.

How much do you need as Life Cover?

Although One life is invaluable but one has to put a no. for his life. This is most trickier question & one has to see various aspects before deciding. If your children r small, you’ll need to provide a large sum as the benefit has to last longer. Accordingly, if they r older, you’ll need a smaller sum. You’ll require insurance to give your family an income for as long as it needs, pay off your mortgage n other loans n cover bigger costs like Children’s college fees & their marriage.


In our View, Cover depends on the Annual Compensation which in turn depends on the Age at which you are taking Life Insurance

S. No. Age Life Insurance
1) Below 25 Years 20-25 Times
2) 25-30 Years 15-20 Times
3) 30-35 Years 10-15 Years
4 > 35 Years 10 Times

Now this Life Insurance need not be a Direct Traditional Plan. It has to be a Mix of which you get through investing through SIP in Mutual Funds & Traditional Plans.

Refer this link to know more about Systematic Investment Plans and to check out the Performance of different SIP of best performing mutual funds:

For How Long

Life insurance is a long term investment. Many people confuse it for short term investment. So this transaction has to be for at least 20-40 years. Some policies allow for a long life cover which helps avoid the dilemma of deciding on a specific duration or term of policy…

Note: Agent give u generally 3-5 years plans. But the only benefit who receives from them is The agent. As short term plan will give only 5 to 10 times of live cover on the premium. The longer the period, The shorter is the Premium (Which decides the agent share) & longer the life cover….

What Factors decides the Premium?

The cost of insurance depends on your age & health. You should not compromise on the level of protection you require.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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