How much life insurance do I need?

Author: P.V. Subramanyam

There are no clear answers to this question which is in the top of mind question for anybody who looks at any kind of insurance (life or general). However, we can see why we buy life insurance:

We buy life insurance to replace income lost due to the death of the breadwinner. The amount of life insurance you need depends on the ‘income stream’ you would want to continue for your family if anything happened to you.

Let’s say you earn Rs 3 million a year. This money provides your family’s lifestyle and standard of living. As long as you are alive and well, your loved ones will remain financially secure. What happens when the breadwinner (read ‘You’) are no longer able to earn this money?

Bluntly, if you died tonight, what would your family do?

How would they pay the home loan EMI, car loan, society charges, utilities, taxes and other bills? Where would the money come from for new clothes for your children, for college fees, or even for your spouse to enjoy an evening out with friends?

Very few people are comfortable answering this question. They live like they will never die and most will die like they never lived. When you have lived a good life, and have a family that you ‘love’ your answers have to be far, far better than these… That’s why we buy life insurance. So that the answer to that question is, without hesitation or doubt: “They’ll be provided for.”