Are you buying a new life insurance policy? In that case, you may think how much money you should invest so you have the ideal amount of coverage for your situation. Well, there is a simple method of calculation that you can use in these cases. It comes to you from the insurers. They tell you that if you buy a policy where the sum assured is around 10 times your present yearly salary it would be a reasonable amount. You can also try another method in this case. You can multiply the years you have for your retirement with your yearly salary. The figure you arrive at would be a good sum too.
Your debts
Apart from this, you need to think of some other critical factors in your life when you are doing these calculations. When you are looking at various life insurance plans, consider the amount of debt that you have yet to settle. Do you have debts such as car loans, credit card loans, and mortgages? You need to make sure you factor in the total amount that you are yet to pay to settle such debts. Include it in your sum assured so that in case of an unfortunate fatality at least your family gets the money it needs to settle the debt.
Replacing your income
While buying life policies this is one major factor that you must consider too. Are you the only breadwinner of your family with several people who financially depend on you? In that case, you need to choose a sum assured where you get adequate protection in case you lose your job suddenly. If possible, choose a policy that provides you with some additional protection against inflation. It is always better to err on the side of caution in such situations.
Insuring your family members
If you have a family, you have important people in your life. You need to insure them too. This is where you can opt for policies that facilitate such coverage. If you do not have a lot of money to spare for such an investment, you should at least try to insure others who are earning in your family. This will make sure that in case of their unfortunate and premature demise, you have some financial protection to fall back on. This may sound selfish, but it is practical too.
