What is Life Insurance? How much is needed?

What’s Life Insurance?

I was a big time movie buff during my bachelor’s days, not that I am not anymore but life has moved on. But if you are movie buff too or have seen considerable movies, then I am sure you have seen at least one movie where the earning member of a family dies and how difficult life becomes for survived family members because of lack of money. For a moment keep yourself in place of that died person, and think what will be your family’s situations.

Are you worried now? You should be. Family member’s loss can not be recovered for sure. So what’s the solution, what can you do right now to make such situation better for your family money-wise?

You need to have Life Insurance to cover your family money-wise for such misfortune incident. It is essentially a bet you are making with Insurance company that, you will pay a premium every year (or whatever it’s premium frequency is) till so many years but if you die in between then Insurance company is going to pay your family sum assured otherwise you lost the bet (and premiums too). That’s the concept of plain vanilla Term Insurance. There is a variant called Endowment plan which returns the money at end of assurance period but it’s very expensive and returns are too low. So it’s always better to buy term plan and invest remaining amount in high return investment, which at least helps you beat inflation in the long term.

How much is needed?

Ideally, the more is better, but how much bare minimum we should be insured for?

At the bare minimum, we should be insured for all long term goals and outstanding debts. Do not forget to consider inflation impact on your goal amount.


Please ensure your family is aware of insurance and how to claim it in your absence.

Additionally, help them to understand how to deal with such a large amount, as mismanagement of money or lack of understanding of your family will defeat your purpose of having life insurance.

So do your research and buy life insurance at earliest.


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Also published on Medium.