Within the umbrella term of life insurance, there are many different kinds of policies. When you browse through the endless list of perfect policy plans for you and your dependents, it is crucial to consider all factors like premiums, loans, goals, incomes, returns, and most importantly sum assured.

But, wait, what does sum assured mean?

Sum assured is the predetermined guaranteed amount paid after the maturation of policy to the beneficiaries or earlier in case of a misfortune event. The sum assured ideally is ten times the amount of your income.

Things To Know Before Deciding Sum Assured

• FINANCIAL GOALS: It is crucial to know your financial goals and expectations out of a policy. Before finalizing the sum assured, understand from your agent that the policyÂ’s benefits align with your needs.
• DEPENDENTS: The sum assured is directly proportional to the number of dependents. The more the number of dependents, the higher the sum assured is needed to cover all their needs.
• EXPENSES: List down your monthly expenses, including electricity bills, groceries, water, and utility bills. This will help you track your familyÂ’s monthly expenses and you will be more prepared while deciding how much money you need to cover the expenses of your dependents and maintain a standard of living.
• LOANS AND INCOME: Evaluate your long-term liabilities and include them in the sum assured. Your family might need to pay off the loans, hence it is crucial to provide for the same.
• ONE-TIME EXPENSE: Few expenses might be big but not recurrent. For example- education abroad, marriage, or purchasing an asset. These need to be included in the sum assured along with monthly expenses.
• AGE: If you are in your 20s or early 30s then it's the ideal time to take a policy with a high amount of sum assured because you have those many years to work and invest.

How To Calculate The Sum Assured?

The desirable sum assured varies as per your situation. All the factors which influence the sum assured have been discussed above. But, how to calculate the exact amount after considering all points?

There are two simple ways you can do it.

• INCOME: Your sum assured should be at least ten times your annual income. In case, you have long-term liabilities, then consider adding them too. Suppose you have an annual income of 10 lakhs, then the appropriate sum assured should be 1 crore.
• HUMAN LIFE VALUE CALCULATOR (HLV): Some insurance companies provide an online HLV Calculator to calculate the sum assured. It allows you to consider various factors while calculating a desired sum assured. The calculations vary as per insurance companies and policies. The HLV calculator considers your age, occupation, policy payment term, policy duration, and payment frequency while calculating the amount.

Using the above-mentioned methods you can figure out the sum assured which will suit you the most or you can talk to our trusted financial advisors .

What Is The Ideal Amount Of Sum Assured?

The ideal amount depends on various factors like the number of dependents, expenses, source and amount of income, assets and liabilities, and age. However, there is a minimum limit to the sum assured which varies across various plans. To know more you can visit our talk to our trusted and experienced advisor s .

Do keep in mind that once the policyÂ’s duration begins:

• You cannot change the amount of the sum assured
• The sum assured is predetermined and uninfluenced by external changes in the market like inflation.

Thus it is essential that you spend some time deciding the ideal sum assured you require.

Conclusion

While calculating your sum assured it is recommended to take advice from a financial expert and have complete knowledge of the policy and its mechanism. There are multiple unseen factors in the market that can indirectly impact your policy, thus it is always better to first understand and then invest wisely. However, the most critical point while deciding on a life insurance policy is to ensure that the sum assured will provide coverage to your family adequately. After all, thatÂ’s the main aim of life insurance- to take care of your loved ones.

Disclaimers:

For detailed information on this plan including risk factors, exclusions, terms and conditions etc., please refer to the policy document and consult your advisor, or, visit our website before concluding a sale. Tax benefits are as per the Income Tax Act 1961 and are subject to any amendment made thereto from time to time. You are advised to consult your tax consultant. Generali GroupÂ’s and Central Bank of IndiaÂ’s liability is restricted to the extent of their shareholding in Generali Central Life Insurance Company Limited.