Posts You Must Read In The Life Insurance Series
Protection of your loved ones is your top most priority but you can’t ascertain what should you do to ensure that they continue to live normally in case of your death.
First step, buy a life insurance.
Your life insurance should be able to provide for the following -
a. Re-payment of all the existing loans taken by you.
b. Meeting household expenses for your dependents.
c. Providing for big expenses like your kid’s education.
How would you now determine the life insurance requirement?
Find out your current loan liability.
Estimate your monthly household expenses. You will also have to estimate the number of years of expenses you would like to provide for your family. You must not forget to consider inflation, and income generated by your dependents.
(I will do a separate post to estimate this)
Estimate the expenses of your kid’s education.
Estimate the current value of assets held. Do not include the house you live in. Your dependents will continue to live in the house.
Use the following formulae
Once you have estimated the term loan requirement, multiply it by 1.25x or 1.5x depending on your risk taking ability. My only suggestion would be to be as conservative as possible.
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