I want to purchase an insurance policy for myself. Is there a method by which I can know how much insurance I actually need?
Vyas Rai Sharma, Delhi
The requirement of life insurance differs from person to person. Since the circumstances of every individual differ from the other, there is no standard method to determine the requirement of life insurance. Actually you yourself are in the best position to decide how much insurance do you need. We, however, can certainly provide you with some inputs which may form the basis of your decision. As we all know insurance is meant to provide financial security to the dependants in the event of death of the insured. Therefore, first of all you need to imagine the financial needs of your dependants without you being there. The ideal sum insured would be an amount which will generate an income which will be sufficient to meet the projected expenditure of your dependants. While projecting the income, you must also consider the inflation factor. From the lump sum amount thus arrived at, you may reduce the already accumulated savings. The net amount would be the fair assessment of requirement of insurance.
