How to Choose Life Insurance Plans According to Your Income? 

Regardless of how much an individual earns, buying a life insurance policy is a very crucial financial decision. Any individual who has dependents or major debts should definitely consider buying a life insurance policy in order to secure their family financially. However, instead of blindly choosing any life insurance policy, you should always do your homework well and determine if the offered sum assured will suit your requirements. 

Read more
Get ₹1 Cr. Life Cover at just ₹449/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
Tax Benefit
Upto Rs. 46800
Life Cover Till Age
99 Years
8 Lakh+
Happy Customers
*Tax benefit is subject to changes in tax laws. *Standard T&C Apply
** Discount is offered by the insurance company as approved by IRDAI for the product under File & Use guidelines
Get ₹1 Cr. Life Cover at just ₹449/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
+91
View plans
Please wait. We Are Processing..
Get Updates on WhatsApp
By clicking on "View plans" you agree to our Privacy Policy and Terms of use

Life insurance coverage comes with various in-built features and there are many different factors that determine the price of a life insurance policy. However, let’s not get into this discussion now and instead, focus on how to choose a life insurance coverage according to your income.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Before zeroing in on a policy it is very important to calculate the sum assured required. One can compute this very simply way by determining one’s daily expenses, pending financial liabilities (debts), and factoring in other inevitable expenses such as children’s education, weddings, etc.

Here are some these factors explained in detail:

Current Expenses-

The major motive of buying a life insurance policy is to ensure that the lifestyle of your family is not affected in any way. According to whatever income group you fall in, don’t forget to add all the monthly expenses and multiply them with 12 to determine the yearly expenditure. Some of the major expenses you need to add are:

  • Premiums paid collectively by your family.
  • Monthly expenditure like utility bills, grocery, etc.
  • Children education fees.
  • Miscellaneous expenses.

These are basic minimum expenses that should be taken care of in case of your demise. As an insured, you need to calculate these expenses over a year and also factor in the inflation factor in mind. For example, if you are 45 years old and your basic yearly expense comes to an estimated Rs. 4,00,000 per year and the inflation rate remains static at 7% per year. Then the same expenses will amount to approximately Rs. 13,00,000 a year after a decade or so. Therefore, the average amount required as an expense will be Rs. 7,00,000 per annum.

So, you will require a sum assured of Rs 1.4 crores i.e. 7,00,000* 20 (Number of years until retirement).

Income Multiplier-

Income multiplier method is another efficient method that can be used to decide the insurance cover you need. Under this technique, you are required to multiply your income by the age group factor you belong too. Thus, you can calculate the minimum and maximum sum assured you will require according to your age group and income. While using the method of income multiplier you will be required to deduct your expenditure from your net income and then use the factor of multiplication. For individuals within the age bracket of 20-30 years, the minimum insurance coverage multiplied by the income by a factor of 5 and for maximum insurance coverage multiply the income by a factor of 10. If you are above the age of 30 years, you can refer to this table.

Age Group

Minimum Multiple

Maximum multiple

30-40

15

20

40-50

10

15

50-60

5

10

 

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Calculation of life insurance policy should not be made only at the time of policy purchase, but rather should be reviewed once in every five years. Thus, if required, additional policies can be bought to provide wholesome support to your family. Moreover, with the help of this method, you can figure out the amount of sum assured you should have.

Assets and Liabilities-

Buying a house is one of the biggest liabilities that one invariably has to incur in one’s lifetime and a major proportion of individuals need to take a home loan for this expense. The insured must add their home loan and any other debts to their list of liabilities, and make a separate list of assets like gold, investments made in the capital market, fixed deposits, etc. By calculating the assets and liabilities one can compute the amount of sum assured he/she will require.

Wrapping it up!

 It is a known fact that most individuals need life insurance sooner or later in life. However, it is very important to know that what kind of life insurance policy will suit you as per your requirements and how much is the sum assured that you should choose. If you choose to buy the policy online, then don’t forget to compare life insurance policies online and avoid getting stuck with insufficient coverage that will not help you in your time of need.

 

Types of Term Plans

Life insurance articles

Recent Articles
Popular Articles
Post Office Gram Suraksha Scheme Calculator

27 Jun 2022

A Post Office Gram Suraksha Scheme calculator is a useful online...
Read more
What happens if you stop paying life insurance premiums?

03 Jun 2022

Buying the best life insurance plan is a wise and learned...
Read more
Postal life Insurance Tax Benefits

26 May 2022

Postal Life Insurance is the oldest life insurer in the country...
Read more
How to Download PLI Statement Online?

24 May 2022

PLI or Postal Life Insurance was an initiative originally...
Read more
Is Life Insurance an Investment?

24 May 2022

The thumb rule to building wealth is to invest your money in...
Read more
How to Check LIC Policy Status, Details, Statement via Online/SMS/Call
Last year, Mr. Rajiv Verma bought a Child LIC policy to provide financial security for his kid's future. However...
Read more
How to Cancel SBI Life Insurance Policy?
As per the Insurance Regulatory and Development Authority, you can cancel a life insurance policy taken within 15...
Read more
SBI Life Insurance 50,000 per year Plan for 5 Years
Life insurance is not only about the financial protection of the family but also about working for life’s...
Read more
PLI Santosh Maturity Calculator
Maturity calculators have proven to be one of the simple tools for digital-savvy insurance buyers. Postal Life...
Read more
LIC Premium Payment Online 2022
The Life Insurance Corporation of India is one of the most recognized and trustworthy names in the Indian life...
Read more
top
View Plans
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL