6 Ways to Measure How Much Life Insurance Do You Need?

Life Insurance can be one of the best assets for all to meet unforeseen situations. It has been the need of the hour for all. No one would ever deny having this financial need. When you start inquiring about the life insurance plans, you come across various questions in your mind, and among all the questions the top one is “how much life insurance do you need?” This question can be solved easily with the help of the people who work in this domain and who sell policies.

The insured amount or the benefits need to be calculated as per your needs and requirements. The number of dependents in your family has a lot of role in deciding the life insurance amount. As per the advice of some known financial experts, term life insurance is the best one to give a great return.

Read Also: 9 Factors That Determine Your Term Life Insurance Rate!



How To Calculate The Amount Of Life Insurance You Need?

The major population is either uninsured or is underinsured. This is mainly because of a lack of knowledge and underestimated plans. Ideally, the sum insured should be 10 to 15 times the annual earnings. Now, the next question is like which plan will best suit you. According to your annual income you can decide your premium value and based on that you will be getting the returns of that insured amount.

Suppose if we assume that Rs 1crore life insurance would be enough to go for; but are we sure that it will suffice the needs of your dependents? A big question it is and we need a proper answer to it. The ideal amount depends upon some of the points. Let us have a checklist to it:

1: How much you earn and how much you can invest in the life insurance policy

2: The major financial obligation that you have with you at your current age

3: The savings that you have after all your financial obligations

4: According to your saving, calculate how much life insurance you can get

If you follow the above-mentioned steps, then it is quite sure that you will be able to get a clear idea as to how much life insurance you need? We also get to know from the above points that a fixed amount can never be taken as a sufficient amount for your life insurance needs but a thorough calculation will give a proper output.

There are many life insurance cover calculator and with the help of that, you can come across how much life insurance you need? They ask a few questions and that includes all your expenses as well as your savings and many more. Some of the questions which you should answer are like:

  1. Number of dependants
  2. Are you the sole earner in the family?
  3. What amount of savings you have?
  4. How much amount have you invested everywhere?
  5. How much loan amount is still pending from your side?
  6. Any future planning for unforeseen future expenses?

Let’s discuss these points in more detail in the next section!



How Much Life Insurance Do You Need?


#1: Number of dependants

How many dependants are there which are dependent on you for all kind of expenses? The more the dependents, the higher will be the premium and so will be rates of everything else. If you have more dependents, then you should go for a bigger life insurance amount.


#2: Are you the sole earner in the family?

One person being the sole earner in the family matters a lot. It increases the burden to the earner and so it becomes the responsibility of that person to make the life of other dependants free from all kinds of financial loads after his death. This can be done through life insurance plans and the term insurance plan can be the best one.

The sole earner needs to take a higher amount as no one can serve the dependents after him.


#3: What amount of savings you have?

How much you have saved is opposite to how much life insurance you need?  The more you have saved; the fewer amounts you will have to pay for your life insurance premium. Some people have a good habit of saving equally along with the expenses.


#4: How much amount have you invested everywhere?

The investment is best made in many places. And we look for investment plans for our future. So, if the invested amount comes to be too much then there are chances that you might have to invest less in the life insurance or vice versa.


#5: How much loan amount is still pending from your side?

The loan we take can be for a home, car, or any other thing. Sometimes it is also an educational loan. Usually, the loan amount is too big and that is also for a longer tenure. If a huge amount of loan is pending then the premium can be higher and if you take a lower amount of insurance plan then that won’t work for you. You should finish off your loans earlier or take for a shorter duration.


#6: Any future planning for unforeseen future expenses?

The future is not in our hands and hence we cannot predict how much life insurance do we need? What we can do is to save some amount for unwanted situations. Saving money can be of big help to come out of trouble from most of the stuff like diseases or even education.

If the saving for the future expenses is good enough then you can curtail down the amount but if you have saved less, then it becomes your top job to save more. This in turn increases the amount of premium.

If you are self-insured then you can save the amount of term life insurance. Self-insurance means that you have saved a lot by yourself and you might not need any kind of life insurance. This is only possible if you earn more and later on save more. The future is unpredictable, hence be insured by life insurance plans.

Read Also: A guide to life insurance assignment and nomination




Saving and expenses both are important and life insurance plans can help you save a lot and secure your future. Your near and dear ones will always lead a happy life once you decide the apt amount of life insurance. You can also consult an insurance advisor for the same. It’s their job and they can best advise about it. Invest wisely!

Hope you liked our article. And we hope it was informative. And if you want to share your thoughts with us, please reach us through the comments section.