Life insurance rule: minimum sum insured an investor needs – explained

Life insurance rule: After the outbreak of the Covid-19 pandemic, investors realized the importance of life insurance in their financial planning. According to financial and investment planners, a good number of people buy life insurance when they failed to get life insurance early in their career. However, they said that when buying life insurance, people look at the minimum sum insured, but it is necessary to understand whether it would be enough for their family or not. They said that one would buy life insurance keeping in mind one’s annual expenses. You should opt for a life insurance policy that offers a minimum sum insured of 12 to 15 times your annual expenses.

Speaking about the life insurance rule that one should implement while purchasing a life insurance policy, Vinit Khandare, CEO and Founder of MyFundBazaar, said, “Generally , the sum insured should be at least 12 to 15 times their annual expenses.or 8 to 10 times their annual income when it comes to buying a life insurance policy.While the minimum amount insured on a life insurance policy will not be less than 10 times the annual premium for persons under 45, for persons over 45, the minimum sum insured is 7 times the annual premium.”

The MyFundBazaar expert added that while opting for life insurance, knowing your needs is essential. While renewable term insurance is known to be sufficient for most people, the individual must analyze their scenario – calculate their children’s education, retirement fund, etc. should make sure to do a thorough analysis to ensure they are getting the best life insurance possible.

How to calculate the minimum sum insured you need

Explaining the rule of life insurance when it comes to calculating the minimum sum insured, Rahul Agarwal, a certified financial planner, said: “To know how much minimum sum insured one requires from a life insurance policy life, one must first calculate his annual income and the present value of his long and medium term goals.Apart from this, one must deduct his current liabilities from the minimum sum insured by the life insurance policy that he If the addition of the present value of a long and medium term objective and the present annual value the expenditure is equal to the final result of the sum assured offered by the life insurance policy and the liabilities of the investor, then only the investor is advised to opt for the insurance policy.”

Disclaimer: The opinions and recommendations made above are those of individual experts or personal finance companies, and not of Mint.

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