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Call: 050 3664479 Do you need life insurance?Life insurance has only one purpose: to complete your financial responsibilities if you die. That’s it. If you have no dependents you don’t currently need life insurance. Life insurance is not an investment. If you do have dependents you should buy a life insurance policy. I’m going to assume you are familiar with term and whole life insurance. If not, here is a good primer. How much life insurance should you buy? Remember, life insurance is meant to make up for your lost income. So we need to figure out how long your dependents will depend on your income. One rule of thumb is to multiply your income by 17 and buy that amount of insurance. So if you bring home Rs.48,000 a year you need Rs.816,000 in life insurance. This is a rough estimate but let’s see if the rule of thumb works. Without getting bogged down in lots of detail, let’s make some assumptions and break this down. You and your spouse are 45 years old. You each bring home Rs4000 a month for a total of Rs8000. You have one child age 7. You will retire in 20 years. The Rs.8000 in monthly income allows you to save for your child’s education and your retirement. If one of you dies, your expenses will increase by Rs.1000 monthly to pay for extra child care for 5 years. Inflation will be 3% over the next 20 years. Investment return will be 5% over the next 20 years . You already have Rs.150,000 in savings. So, in this example, you need to replace Rs.5000 in monthly income for the next 5 years and then Rs.4000 for the next 15 years. Tell you what, we’re just going to replace Rs.5000 for the next 20 years and give the surviving spouse a little bonus for putting up with you as long as they did. Now let’s figure out how much term life insurance you need. Go to this calculator and input your desired income (Rs.60,000), number of years (20) and rate of return (2%). We used Rs.60,000 because that represents Rs.5000 in monthly income for 12 months. We also used 2% for the rate of return which is 5% return less 3% inflation. Mathematically, that isn’t 100% the way to do it but it really is close enough for what we need. Contact 050 3664479 for your insurance requirements in Dubai,Sharjah,Ras Al Khaimah,India. |