4 STEPS TO CALCULATE YOUR INSURANCE NEED

Step 1 : Know your family income / expenses

[a] Your monthly income
[b] Multiply [a] by the percentage of income you wish to cover ( 75 -80% is a good estimate)
[c] Spouse’s monthly take home pay. If any, including any employer and PF benefits
[d] Substract [c] from [b] . This is rougly the monthly shortfall the surviving spouse and family would have.
[e] Multiply [d] by 12 to annualise the amount.
[f] Multiply [e] by the number of years the spouse and family will need the replacement income(goes down as you age)

YOUR FAMILY EXPENSE FUND : [ a]+ [b]+[c]+[d]+[e]+[f]


Step 2 : Know your future family needs
[a]Family expense fund
[b]Child care
[c]Emergency / Contingency Fund
[d]Home Loan pay-off
[e]Debt Pay-off
[f]Retirement fund
[g]Other needs


TOTAL REQUIREMENT : [ a]+ [b]+[c]+[d]+[e]+[f]+[g]


Step 3: Know your current assets
[a] Cash / savings
[b] House (current value minus the outstanding loan)
[c]Investment (stocks,bonds,mutual funds,others)
[d]Retirement plans(PF,PPF,others)
[e]Current life insurance
[f]Other assets


TOTAL ASSETS : [ a]+ [b]+[c]+[d]+[e]+[f]


Step 4 : Your calulation


TOTAL REQUIREMENT – TOTAL ASSETS = INSURANCE NEEDS