Life Insurance Coverage Methods
1. Human Life Value (HLV) Method
HLV calculates the present value of your future earnings. It considers your current income, expected income growth, and remaining working years.
2. Income Replacement Method
This simple method multiplies your annual income by 10-15. The multiplier decreases with age as working years reduce.
3. Needs-Based Method
Adds up all financial needs: outstanding loans, children's education, emergency fund, and ongoing family expenses.
Types of Life Insurance
| Type | Best For | Typical Cost |
|---|---|---|
| Term Insurance | Pure protection, maximum cover | ₹500-1500/lakh/year |
| ULIP | Insurance + investment | Higher premiums |
| Endowment | Savings + insurance | Very expensive |
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Important
Term insurance gives 10-20x more cover than traditional plans for the same premium. For most people, term insurance + SIP in mutual funds is the best strategy.