Confused about life insurance cover? Here is a way to assess it

Sarbajeet K SenMoneycontrolHave you bought any life insurance plan over the years or are you planning to start off your insurance portfolio with a life cover? Your insurance agent might propose that you buy a few more plans with various amounts of sum assured and different features. You can do your own research but you are still finding it difficult to decide on how much more protection you should take. Is your existing life cover enough to replace your income should something happen to you?Deciding on a how much life insurance one should purchase is difficult and varies from person to person and their circumstances. However, insurance experts suggest taking into consideration your obligations and your debt to arrive at a reasonable figure that could substitute your income should you not be there to support your dependents. “The thumb-rule in life insurance is that your sum assured should be 7 to 10 times your annual salary. If you are insured for anything less than this then you are under-insured,” Naval Goel, founder and CEO, PolicyX.com told Moneycontrol.com. Thus, if your annual income is Rs 10 lakh, the minimum life insurance cover that you should buy can be between Rs 70 Lakhs and Rs 1 crore.Goel suggests taking into consideration the proposed policyholder’s age, the ages of spouse and children, mortgage payments and other debt and future obligations, future education expenses for children and/or spouse before deciding the suitable amount of insurance.He, however, cautions against taking on high premium payment commitments compared to your current salary. “Generally, one or two life insurance policies with adequate sum assured amounts are enough for an individual. You should avoid increasing your portfolio beyond your source of income and avoid buying expensive policies whose premium eats into your salary,” he said.Mahavir Chopra, Director, Health, Life and Strategic Initiatives, Coverfox.com, suggests factoring in the impact of inflation on your expenses while purchasing your life insurance cover. “Insurance plans are purchased to cover probable financial losses or liabilities. One should calculate the possible loss or expenses, factor inflation to assess the adequacy of the insurance cover. In the case of term life insurance, one must look at the annual expenses, liabilities, factor inflation to calculate the adequate coverage.”