INSURANCE: IS THE COVER ENOUGH?
Do You Need Insurance
If you are a:
Single working woman with no dependent- NO.
Single working woman with dependents (parents/sibling)- YES
Working woman with a well-earning husband, no dependents – Probably NO
Married working woman with dependents (kids, family) – YES
The need for insurance depends not on your income or expenses but purely on your dependent’s need for income to maintain current or desired lifestyle in your absence.
Not an Investment Tool
One you know you need coverage, look for a policy that offers you maximum coverage for minimum premium outgo. That is possible if you stop looking at insurance as an investment tool. Once an insurer mixes investment benefits with insurance policy, starts promising you higher returns at the end of term, you should know that you will be paying higher premium for the same amount of coverage. Go for a pure insurance product.
Term of Insurance
Depends on how long you think your family or dependents need your income to sustain. If your spouse earns as much as you do and kids are placed in job, you don’t really need an insurance coverage. But if you have a special child who needs constant care and whose expenses will be met from your estate, you must have a whole-life insurance policy so that when you are gone, he is left with enough to sustain himself.
How Much Coverage is Enough
This will again depend on the kind of lifestyle your dependents have today or can do with in your absence.
Calculating the Insurance Amount
There are several insurance calculators sponsored by the insurance industry on the internet and they can easily tell you how much. But many a time the amount could far exceed what may be actually required, for obvious reason. Insurance industry will work on the best estimates for a lifestyle your dependents may want and the most conservative return on what your investments can fetch, say for 20 years when you are gone. So use that calculator and many others but apply reason in feeding data, after imagining different situations.
What all do I need to consider while calculating insurance amount?
Your current income and assets and expenses (house rent/home loan, car loan, child care, insurance, travel, vacation, basic living expenses etc) and how these figures may change in your absence. Also, future major costs such as child care, higher education, girl’s marriage.
