How much life insurance should I have?
Before buying a life insurance plan, you should keep in mind how much insurance coverage would be sufficient for your family in the future.
Your insurance coverage should be decided on the basis of the following conditions–
- The needs of you and your dependants;
- The amount of expenditure you will need to incur to fulfill your needs; and
- Your general financial circumstances.
There is a golden rule that states the death benefit of your policy should be 10-12 times of your annual earnings.
The Years-Until-Retirement method
The Years-Until-Retirement method is another approach to determining your life insurance needs. This method involves multiplying your current annual salary by the number of years left until you retire. For instance, a 40-year-old earning 20,00,000 per year would require 5,00,00,000 in life insurance coverage (25 years × 20,00,000).
The DIME Method
The DIME Method (Debt, Income, Mortgage, Education) is a strategy for determining the minimum amount of life insurance coverage needed to support your family's expenses in the event of your untimely death. This method ensures your policy covers all outstanding debts (including your mortgage), funds your children's education, and replaces your income until your kids reach 18 years ol
