well,
The event that something unfortunate should happen to you. One must provide enough, so as to generate a future income stream that will take care of the financial needs of their dependants. How much insurance you need depends on your annual income, your expenses and your existing assets. Use our Insurance Calculator to get a rough estimate of how much you should insure yourself for. Concept of Human Life Value Generally speaking, one can estimate the extent of life insurance by calculating one's โHuman Life Valueโ (HLV). This is the net present value of one's future earnings. Put simply, it is the amount that a person's family would permanently lose, should anything unfortunate happen to that person. As a thumb rule, a 30-year old should insure oneself for about 8 times his or her annual income. At 35, this is about 6 times. Of course, the exact amount must be adjusted according to the number of dependents, existing investments and one's lifestage. For instance, if at 30, a person has two children and parents to provide for, the amount of insurance should also be higher. You can calculate your Human Life Value by multiplying your current annual income with the number of years remaining for your retirement. Let's assume that you are 30 years old and you earn Rs. 4,00,000 per annum. Now, if your retirement age is 55 you have 25 years to go before retirement. So your Human Life Value is (25 x 4,00, 000) = Rs. 100, 00, 000 (One Crore rupees). So, your present Human Life Value is one crore rupees, provided you stay healthy. If you take factors like inflation and increase in income over a period of time into account, your Human Life Value is a lot more.
Answered by
Santosh Kuma
, an ibibo Master,
at
10:42 AM on October 24, 2008