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Is a Rs 1 Cr insurance cover enough for you?

A Rs 1 Cr insurance sounds like a solid round figure. It seems “more than enough” to most individuals. But the question is that if it is truly enough for you?

Chances are you’d have seen one ad or the other advertising an insurance ad which goes something like this:

“Get Rs. 1Cr insurance for just Rs 20/day.” 

A Rs 1 Cr insurance sounds like a solid round figure. It seems “more than enough” to most individuals. But the question is that if it is truly enough for you? 

Consider this. For those of you who are married and have a kid, do you spend the same amount of money when you were single and living with friends? We believe a certain salary figure would be “enough”, till we actually reach that figure and realise that it may not be enough for some of our financial goals. 

As we keep growing in our respective careers and increase our earnings, we realise that different financial goals need different savings amounts and a round figure is not what we are looking for but what is actually enough. This could be more or less than the amount we were “fixating” on at different points. Sometimes it is one lakh, later ten lakhs, then fifty and so on. 

If this is the case for most of our financial goals, then how can we believe that a round figure like 1 Cr would be sufficient for our family’s needs in our absence?

Consider what would your family needs be. Education for your children, living expenses for the rest of your earning period, healthcare expenses, the list is a long one. 

This is why a general guiding principle while buying insurance is to consider your family’s needs and then buy insurance which is equal to a multiple of your earnings. For example, for someone who is 35 or younger 25 times their current annual earnings might be more apt than a round figure such as 1 Cr. The final figure you arrive at could be more or less than Rs 1 Cr. 

Needs will decide your insurance amount, not ads

This is why a general guiding principle while buying insurance is to consider your family’s needs and then buy insurance which is equal to a multiple of your earnings. For example, for someone who is 35 or younger 25 times their current annual earnings might be more apt than a round figure such as 1 Cr. The final figure you arrive at could be more or less than Rs 1 Cr. 

For someone in their 50s, with just 10-15 years of earning left considering a retirement at 60-65, an insurance policy that covers 10x their annual earnings may be enough. But this is again just a guiding principle. 

What someone would need will vary depending on the size of the family, net wealth, financial goals etc. Not owning a house, loans, and liabilities all increase the coverage needed by an individual. If both spouses are earning members of the household, this will also impact the insurance amount. Many individuals also don’t factor in inflation which can have an inordinate impact, especially for those who are on the younger side.

What matters most is that you keep in mind how long would the money have to provide for the needs of your family and would it be sufficient for critical financial goals such as children’s education.

Do this

Take the time to do a proper analysis of your family’s needs. Have a chat with your spouse or parents, and understand what are the must-haves for your family. Once you have figured that out, factor in inflation. If you are not sure about your insurance needs, be sure to talk to a qualified financial adviser who can guide you on this. 

In the end, remember this, Insurance is for the unpredictable. It helps you ensure that your family is not impacted financially should something happen to you. This means taking care of all their needs. So think about what’s the right insurance amount for you and take the right decision.

How much life insurance do I need?

You should have insurance for
as per your age and salary

Disclaimer: The amount shown is merely indicative and is subject to change depending on your actual needs and life situations. We recommend you speak to a qualified financial planner to find out exactly how much insurance would be sufficient for you.

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