Life Cover Calculator

## What is the Life Cover Calculator? The Life Cover Calculator uses the Human Life Value (HLV) approach to determine how much life insurance coverage you need. HLV calculates the total present value of your future income that would support your family if you were no longer there. ## Formula Used Human Life Value (HLV) = (Annual Income x Years to Retirement x Survival Factor) - Outstanding Liabilities Simplified: Life Cover Needed = (Your Annual Income x Years to Retirement x Factor) - Existing Cover - Savings Where Factor accounts for inflation (typically 3 to 5%) and a 5% discount rate. Alternative: Income replacement method — cover = 10 to 15 x annual income. ## Worked Example Annual income: Rs 12,00,000, Age: 35, Retirement at 60, Outstanding loans: Rs 30 lakh, Existing cover: Rs 0 Years to retirement: 25 Real return rate (after inflation): 5% Income replacement factor: (1 - (1.05)^-25) / 0.05 approximately 14.09 Income to be replaced: Rs 1,26,90,240 Life cover needed approximately Rs 1,26,90,240 - Rs 30,00,000 = Rs 96,90,240 approximately Rs 1 crore ## Frequently Asked Questions 1. How much life insurance do I really need? A common thumb rule is 10 to 15 times your annual income. For a Rs 12 lakh income earner with a Rs 30 lakh home loan and 2 children, the realistic need could be Rs 2 to 3 crore. 2. What factors affect how much cover I need? Key factors: annual income and expected growth, number of dependents, outstanding loans, children education costs (Rs 10 to 50 lakh per child), spouse retirement needs, inflation, and existing savings/assets. 3. Is term insurance the best form of life cover? Yes, for most people, a pure term insurance plan provides the highest coverage at the lowest cost. A Rs 1 crore term plan for a 30-year-old costs Rs 500 to Rs 1,000/month. 4. Should I factor in inflation when calculating cover? Absolutely. At 5% inflation, your Rs 12 lakh income today will be worth only Rs 7.5 lakh in today purchasing power in 10 years. Your life cover should ideally grow with inflation or be reviewed every 3 to 5 years. 5. Can I have multiple life insurance policies? Yes, you can have multiple life insurance policies from different insurers. The combined cover can be claimed from each insurer independently in case of death.