How much Life Insurance does one need?

A Google search for this question throws up close to 67.5 million results in 0.20 seconds! One would imagine that the answer must be fairly obvious. Well, in some ways it is.

Yes, the amount that can be considered as an adequate insurance will differ for each individual but the guiding principles are pretty much the same for all.

One of the key reasons why one should consider life insurance is to provide financial support and a means to replace lost income for your dependents and family in the event of your death, especially if you are the primary earner for the family.


At the same time, it can also be used to ensure that your liabilities, if any, are met without imposing an additional financial burden on your dependents.


In addition to this you could use insurance as a tool to provide for key events and requirements of your loved ones like a Child’s marriage or education.


The adequacy of your life insurance cover should be a derivation of which of the above needs are you trying to provide for and what are the associated amounts that will be appropriate for each such need.


Needless to say, the risk cover that you need will be reduced to the extent of any savings / assets that you may already have to offset some of the liabilities you are trying to provide for. Having decided the amount of insurance that you want, however, is just the first albeit important step.


There are now 23 Life Insurance Companies in India. Each has between 5-14 products meeting different needs and life stage requirements. There are multiple charge structures as well. Do you know that many companies offer ‘e-enabled’ products with lower charges if you buy online? The fact is that the internet reduces the cost of acquisition for an Insurance company, and they often pass back the benefits to customers.


One then needs to figure which product to buy. Here is where one should try and obtain independent, unbiased and factual information about best products from leading insurance companies in India to determine which ones suit your requirements at the lowest cost. My strong recommendation would be to go online!

While there can be no replacement for the loss of a loved one, with the right life insurance product you can at least minimise the financial hardships and strife that your family may be exposed to.