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.
The key reasons why one should consider life insurance are:
• 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.
• To ensure that your liabilities, if any, are met without imposing an additional financial burden on your dependents.
• 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 taken into account which of the above needs you are trying to provide for and the amount of insurance that will be appropriate for each need. While some may recommend the use of ‘rules of thumb’ such as 10-15 times of your annual income being the insurance cover that you should consider, such rules may not be suitable under all circumstances and should be used with care. The best way to determine your insurance needs to determine the financial requirements of your dependents for each of the above mentioned needs.
(Please see My Life Insurance calculator to help you determine your insurance 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. 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.
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.