How much insurance is enough for you? Here’s how to find the right coverage amount

Do you know the most crucial step when buying a life insurance policy? While choosing the right policy and insurer are stepping stones towards a sound insurance plan, getting your coverage amount right is the key. In this article, we will help you beat the risk of being underinsured by calculating the right insurance coverage.

What is policy coverage?

In insurance parlance, coverage means the maximum financial protection an insurance policy can offer. Let's understand this with an example. Mr. X buys a term insurance plan of ₹1 crore. Upon Mr. X’s death within the term period, the insurance company will pay his nominee ₹1 crore. In this case, ₹1 crore is the policy coverage, also known as the called sum assured.

Find your correct life cover in 4 steps!

Getting inadequate coverage can defeat the purpose of getting insured as the amount would not be enough to protect your loved ones. Therefore, it is critical to ascertain your correct coverage amount. This can be done in 4 easy steps:

Step 1: Calculate your monthly expenses: Firstly, you need to find out your monthly expenses. This should include the money you spend on groceries, electricity and water bills, fuel expenses, rent etc.

Step 2: Ascertain savings: If you have a certain amount as savings while buying an insurance plan, then keep that number handy.

Step 3: Analyse liabilities: Now, time to look at your liabilities. This could include loans, like home, car or personal loans, or credit card payments and other dues.

Step 4: Calculate the ideal life cover for you: When you have all the three figures mentioned above, all you need to do is go to the Upstox app. Under the Insurance section, you will find an option to calculate your ideal cover. Enter your monthly expenses, savings and liabilities and instantly know your ideal cover amount and term period.