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Health and life insurance: how much cover do you need?

business Updated: Nov 25, 2011 21:36 IST
Bindisha Sarang
Bindisha Sarang
Hindustan Times
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If you are planning to buy a life or health insurance policy and are not sure how much is enough, here is a quick guide to help you out.

Life insurance

The general thumb rule says that you should not have less than 8-10 times your gross annual income as life insurance cover. So, if your annual gross salary is Rs 1 lakh, then you should take R8-10 lakh insurance. Anything less means you are under-insured, which means in case of your death, your dependants may not have adequate funds. Keep in mind that while going in for a life insurance policy, a term plan is the best bet.

Health insurance

There is no thumb rule to guide you about the amount of health insurance you need. Financial planners say that keeping in mind the average cost of major surgeries these days, a cover of R4 lakh is good enough. Also, if you are covered by your employer for say Rs 2 lakh, you can go in for an individual health policy of another Rs 2 lakh, provided that you work at a reputable company and don’t change jobs frequently.

If you have a family, you can top up your individual policy with a family floater. Keep in mind that even though a family floater policy covers all the members of the family, even if you make a claim for one member of the family, the amount that was claimed will reduce the sum insured by that much. For instance, if your family floater policy offers a sum insured amount of R3 lakh and one member makes a claim of Rs 1 lakh, the sum insured for the rest of the year would be reduced to Rs 2 lakh.

What should you do?

The above-mentioned figures do not take into account your specific individual situation. These one-size-fits-all thumb rules come handy when you don’t have immediate access to the Internet and your agent is trying to sell you a insurance policy. There are many online insurance amount calculators, available on the website of insurance companies that can provide you an in-depth view of the total life insurance amount you need based on your age, life stage and lifestyle.