When you buy a life insurance policy, you should ensure that the coverage is optimal. This is because life insurance plans help you fulfil your goals. If the coverage is sufficient, you can create an optimal corpus for your goals. Thus, having a suitable sum assured is important.

There are various factors that determine how much sum assured that you should avail of. These factors include the following –

1. Your lifestyle expenses

The first thing to consider is the lifestyle expenses that you incur. Higher the expenses higher should be the coverage that you avail of. In fact, you should ensure that the coverage is sufficient enough to help your family continue the same lifestyle in your absence. For example, if your annual lifestyle expenses amount to Rs.3 lakhs a year and you are aged 30 years, the coverage should be at least Rs.2.1 crores considering a life expectancy of 100 years. 

2. Your liabilities

In case of your unfortunate demise, your liabilities would fall on the shoulders of your family. To avoid this, you should make provisions for them. Your coverage should, therefore, be sufficient to cover your outstanding liabilities so that your family can live debt-free.

3. Your financial goals

Estimating the value of your goals would help you decide on the coverage that you need. If you are buying a policy for the fulfilment of a specific goal, the sum assured should be aligned to the value of the goal. For example, say you want to finance your child’s education which would cost Rs.50 lakhs after 20 years. So, if you buy a child plan for financing the education, the sum assured should be Rs.50 lakhs so that the goal is fulfilled even if you are not around.

4. Number of dependents

The number of family members depending on you also impacts the coverage amount. If you have too many dependents you should opt for a high coverage amount so that the financial needs of every dependent can be met optimally.

5. Existing assets and policies

If you have existing investments and assets, your life insurance requirement reduces to some extent. This is because your family has the financial backing of such assets and need coverage that fulfils any shortfall that there might be. Similarly, if you have existing life insurance policies, you can opt for a lower sum assured since the existing coverage would provide additional financial support to your family.

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These are some of the common factors that determine the life insurance coverage that you can avail. When buying a policy, you should undertake a fact-finding exercise to check your financial needs and requirements. List down your incomes and assets on one side, and the expenses, liabilities and financial goals on the other. This would help you assess the financial requirement that you have and the coverage that you need.

To get a high coverage at an affordable rate, you can opt for online term insurance plan. These plans cover your death risk and give financial support to your family in your absence. You can avail of a high sum assured at very affordable premium rates and provide complete financial security to your family.

Opt for suitable life insurance coverage so that the policy fulfils the financial needs that you have.