1. Are you underinsured?
10 LAKH Will that be sufficient
How much
to take care of your
Life insurance
RUPEES!! do you have
family’s needs if you
are not around?
When it comes to life insurance, the question which arises often is how much is enough. Many people still
feel life insurance cover worth 10 or 20 lakhs is a huge amount. While 10/20 lakhs may really seem to be big
amount it may not be adequate when it comes to life insurance cover. It will take care of basic needs such as
food and clothing for a few years. But what after that? What about your child’s education and marriage in
future?
The concept of Human Life Value (HLV) can help you to calculate and understand how much life insurance
cover you really need. In simple terms, HLV is the expected life time earnings of an individual, i.e. the total
income that the individual is expected to earn over the remainder of his working life, expressed in present
Rupee terms.
Things to keep in mind while calculating HLV:
1. How long you will need to financially support your dependents? Example- 20/40/60 years
2. Future expenses – Expenses for education and marriage of children.
3. Outstanding liabilities – Unpaid loans, credit card payments etc
4. Inflation – The decreasing power of money with increasing years
5. Household expenses – Monthly/yearly household expenses with expected increase in future
6. Funds for emergencies/medical expenses
Thus the concept of Human Life Value (HLV) can help you decide whether, the life insurance cover you have
is enough or you need additional cover. One should also not forget that the value keeps changing with time
with increase or decrease in assets/ income and liabilities.