It is seen many times that people take term insurance plans without estimating the exact needs of their family. By doing this, the family has to face financial problems in their absence. If you are also taking a term plan these days, then before that it is important to know how much insurance cover you should take. This cover should be such that your family does not have to face financial problems in your absence. We are telling you about 2 such concepts that will help you to know how much cover you need.
The Human Life Value (HLV) concept calculates the total income that a person can earn during his working life. It is then discounted with the estimated inflation rate. In other words, the future income of that person is calculated according to today’s price. Expenditure on this value individual is calculated to find out the economic value of that person in the family.
For example, suppose Ashok is a 40 year old man who earns Rs 5 lakh annually. Out of this, he spends 1 lakh 30 thousand rupees on his personal expenses. While the remaining 3 lakh 70 rupees is spent on the family. Here 3 lakh 70 thousand will be the economic value of Ram. That is, even if you are not there, your family will need 3 lakh 70 thousand rupees annually. You should choose a term insurance cover according to this need.
This is a basic way to calculate your life insurance coverage needs and is based on your annual income. Accordingly, the required insurance coverage is the multiplier of your annual income plus the remaining years of retirement. i.e. required insurance coverage = annual income x number of years for retirement.
For example, suppose your annual income is Rs 4 lakh and you are 30 years old and are planning to retire after 30 years i.e. at the age of 60. In this case, your required life insurance coverage should be Rs.12 crores (4,00,000 x 30).
If you have taken a loan then keep that in mind too.
If you have a loan or debt, then this should also be kept in mind. In such a situation, if you have taken a loan in any way, then it should also be included in the term insurance cover. If you have other loans or debts, then the insurance cover should be decided keeping them in mind.
Term insurance is a type of life insurance policy that provides coverage at a fixed payout rate for a limited period of time. If the life insured dies during the term of the policy, the cover amount is paid to the nominee. It provides financial security to the family.