1. Calculate the Right
Life Insurance Cover
Get the right life insurance cover in 3 steps!
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2. The Human Life Value (HLV)
approach to calculating life
insurance requirements
accounts for 4 factors:
• Annual income
• Annual expenses
• Number of years to retirement
• Inflation-adjusted cost of
expenses
Human Life Value
The HLV figure you arrive at should help you make a reasonably accurate
assumption of the value of your income.
3. Step I
• Your Annual Income =
salary+bonus+employee
benefits+income from
investments.
• Deduct your personal
expenses (food, clothes, travel,
etc) from the above.
• What is left, is what your
family consumes per annum.
4. Step II
• See how many years are left till
you retire.
• Project family expenses upto
retirement, allowing for reasonable
increments.
•Subtract any pension benefits
your family gets upon your death.
•Add non-recurring expenses, like
your children’s higher education.
The shortfall of the below mentioned expenses is the amount that you should
insure yourself for.
5. Step III
• Calculate the shortfall’s
present value, allowing for a
reasonable rate of inflation.
• Factor in your existing
investments by deducting your
net worth and accounting for
any big-ticket loans, to arrive at
a reasonable HLV figure.
6. Know Your Life Cover Needs
• The HLV figure you arrive at
should help you ascertain the
amount of life insurance cover
you need.
• Since HLV is a moving target,
keep reviewing it every 5 years,
at the least.
8. This 2-Minute Learning series is
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