How to calculate the right amount of life cover?

Name withheld on request

It is difficult to give a specific number for the life insurance cover of an individual, as it depends on many factors like age, gender, annual income, health and lifestyle etc.

Buying a sum assured equal to 10 times the annual salary is one way of assessing your insurance requirement, and arriving at a minimum insurance cover. However, you can take a more practical approach while buying a term insurance plan.

Start by evaluating your future life goals and the estimated amount required to achieve them. Then take into account your lifestyle expenses, current liabilities and expected rate of inflation.

This figure will help you decide how much life cover you may need to meet the financial future needs of your family. It is also advised to revise this amount from time to time, as your financial situation and life goals may change over time. You can use many tools and calculators available on the internet which will be best suited for you.

Life insurance companies now offer various payment options. How do I choose the best payment option for me?

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Insurers can offer flexible payment options to customers to help them use the life cover amount as per their needs. Depending on your life goals and financial needs, you can opt for lump sum or periodic payments or even partial lump sum and balance in instalments.

Lump sum payments are generally suitable for meeting major expenses like higher education of a child or marriage, foreign holidays etc.

For someone looking to have a supplementary source of income, periodic payment options (monthly, quarterly, annually, etc.) can be useful to meet day-to-day expenses.

Sameer Joshi is the Chief Agency Officer at Bajaj Allianz Life Insurance.