Today I was talking to a friend who was telling me about his Insurance cover. He is a 32 year old guy and has a cover of Rs 7 lacs and pays a premium of approx. Rs 50000. When I told him that I’m covered for Rs 35 lacs with only Rs 20000 premium, he did not beleive me at the first instance.
If you haven’t started a family, an Insurance cover is the least of your priorities. But even though it’s not that cool to be insured, it sure is smart when there are people who depend on you.
A very simple way of looking at your economic value towards your family is as follows. Imagine a monthly income of Rs 20000 and the net income provided to the family is Rs 18000 after deducting Rs 2000 for personal expenses. Thus the annual income provided to yr family is Rs 226000. The amount of money which will earn Rs 226000 pa at 8% interest rate is Rs 28,25,000. This is only a representation of the value of HLV. It is not the exact way of calculating yr HLV.
Right now you can go to this page to calculate your HLV, The future income growth, your income generating assets, liabilities, spouse income, children’seducation, etc are also to be factored in.
Ask your agents about the term assurance plans and he would definitely discourage you from taking one. After all there’s little commission he’s getting there since the premium is so low.
The point is that Insurance is NOT Investment.