Ever wondered how your family will survive financially in your absence? This is where Sum assured in life insurance plays a very crucial role. It acts as a security net and ensures your family stays financially protected during unfavourable times.
What is Sum assured in Life insurance?
Sum Assured is an amount paid to your nominee by the company if something happens to you during the policy term. The amount helps your family survive the difficult time they are going to face in your absence.
Ideal Sum Assured required?
As per the general rule, the Sum assured in your life insurance policy should be 10-15 times your annual income. In simple terms, this means your family must have an amount 10-15 times your annual income after your death.
“For instance, if your annual income is 10 Lakhs, your risk coverage should be 1cr- 1.5 cr.”
Some important factors to consider
- Liabilities: You should consider all your loans, including car loans, home loans, and personal loans.
- Future Goals: You should also consider your children’s marriage, education, and your spouse’s future needs.
- Family Expenses: You must ensure that the policy covers your household expenses.
Use the Human Life Value (HLV) method
The Human Life Value (HLV) method, introduced by Prof. S. Huebner, is one of the most effective ways to calculate the exact insurance coverage.
It considers:
- Your current income
- Annual expenses
- Remaining working years
This method provides a more accurate estimate of how much insurance you would actually need. You can easily calculate your required coverage (Sum Assured) using this calculator.
Calculate your required coverage using the link below:
FAQs (Frequently Asked Questions):
1. What is the minimum Sum Assured required?
The minimum sum assured varies from person to person. However, experts recommend that you should have at least 10–15 times your annual income as life insurance coverage.
2. Can I increase my Sum Assured later in the same policy?
No, in most cases, you cannot increase the sum assured in the same policy later. But you can buy a new policy to increase your coverage.
3. Is it better to opt for a higher Sum Assured?
Yes, choosing a higher sum assured is usually beneficial because it provides better financial security and also offers a higher sum assured rebate.
