How much life insurance should one have?

This is a very often asked question by clients.

Method 1:

Step 1 – Calculate your annual lifestyle expenses

Step 2 – Multiply this by {85 – your age (in yrs) }.

Eg if your age is 33, then the multiplier will be 52. (85-33)

Step 3 – Add all loans outstanding and any milestone expenses.

Step 4 – Reduce your current value of investments and existing term insurance (if any)

Note – 85 is the average life expectancy that we have assumed.

Method 2: (Maximum Life insurance cover you can get)

Step 1: Calculate your annual CTC

Step 2: Find your remaining earning years (60 – current age)

Step 3: Multiply your CTC by remaining earning years

This is the max life cover you can get.

Step 4: Reduce investments and current life insurance cover you have to arrive at balance life cover required