Life Insurance Calculator
As your lifelong wealth management advocates
As your lifelong wealth management advocates
Life insurance is a financial safety net that provides monetary protection to your loved ones in case of your untimely death. It's essentially a contract between you and an insurance company where you pay regular premiums, and in return, the insurer promises to pay a specified amount (death benefit) to your beneficiaries upon your death.
This calculator determines optimal life insurance coverage by analyzing financial obligations and future needs. Here's how it works:
Step I: Outstanding Loans
Records all existing debts (home, vehicle, personal loans) that need immediate settlement upon death. Example shows total loans of ₹20,00,000, ensuring the family remains debt-free.
Step II: Future Financial Goals
Calculates present value of major future expenses:
Children's Education: ₹50,00,000
Children's Marriage: ₹30,00,000
Total: ₹80,00,000
Step III: Required Corpus for Family's Future
Calculates living expense requirements:
Annual Expenses: ₹7,20,000
After 30% reduction: ₹5,04,000
Net of Wife's Income: ₹4,04,000
Considers key factors:
Spouse's Age: 32 years
Life Expectancy: 85 years
Inflation: 5%
Investment Returns: 9%
Net Returns: 3.81%
Required Corpus: ₹94,91,334 (calculated for 53 years with inflation adjustment)
Step IV: Total Insurance Required
= Loans + Goals + Required Corpus
= ₹20,00,000 + ₹80,00,000 + ₹94,91,334
= ₹1,94,91,334
Step V: Additional Coverage Needed
Current Resources:
Investments: ₹15,00,000
Existing Insurance: ₹50,00,000
Total Available: ₹65,00,000
Additional Coverage Required:
= ₹1,94,91,334 - ₹65,00,000
= ₹1,29,91,334
This calculation ensures:
The calculated amount provides comprehensive financial security by considering immediate obligations and long-term needs while accounting for existing resources.
The mechanics of life insurance are straightforward:
The most recommended type of life insurance due to its simplicity and affordability. It provides pure life coverage for a specific period (term) without any investment component. If death occurs during the policy term, beneficiaries receive the sum assured.
Key benefits:
These policies combine insurance and savings, typically offering lower returns compared to pure investment options.
Investment-cum-insurance products where premiums are partially invested in market-linked funds.
Most policies have a suicide exclusion clause for the initial 1-2 years.
Term insurance should be your primary choice because:
Remember: Buy Term, Invest the Rest
Riders are additional benefits you can add to your base policy. Common riders include:
Recommendation: Take only essential riders like critical illness and accidental death benefit. Avoid loading too many riders as they increase premium significantly.
Choose a policy term that covers your working years, typically until retirement age (60-65 years). Consider:
A good rule of thumb: Policy term = 60/65 minus your current age
If you're stuck with a traditional policy or ULIP:
Paid-up Policy: When you stop paying premiums on a traditional policy after paying for minimum required years (usually 3), it becomes paid-up with reduced benefits.
Avoid buying life insurance policies in children's names because:
Better alternatives for children:
Should Buy:
May Not Need:
Remember, life insurance is not an investment - it's a protection tool for your family's financial security in your absence.