The most important decision in any LIC policy is not which plan - it is how much sum assured. Too little and your family is underinsured. Too much and the premium strains your monthly budget, increasing the risk of lapse. Here is how to calculate the right amount.

The Human Life Value (HLV) Method

HLV is the present value of your future income that your family would lose if you were gone. The basic formula: (Annual income - personal expenses) x remaining working years. For a 35-year-old earning Rs 10 lakh with 25 working years left and Rs 2 lakh personal expenses, HLV is approximately Rs 2 crore.

The Simple Rule

| Annual Income | Minimum Recommended Coverage | |---|---| | Rs 3 - 5 lakh | Rs 30 - 50 lakh | | Rs 5 - 10 lakh | Rs 75 lakh - 1 crore | | Rs 10 - 20 lakh | Rs 1.5 - 2 crore | | Rs 20 lakh+ | Rs 3 crore+ |

Additional Factors to Add

  • ▸Home loan outstanding - add full outstanding amount
  • ▸Business loans - add the amount your family could not repay from business income
  • ▸Children's education costs - add Rs 20-50 lakh per child depending on education goals
  • ▸Emergency fund buffer - add Rs 5-10 lakh for the transition period

LIC Sum Assured and Premium - The Balance

In an LIC endowment plan, higher SA means higher premium. For a 35-year-old taking Jeevan Anand (Plan 914) for 25 years, a Rs 10 lakh SA costs approximately Rs 40,000/year. Rs 25 lakh SA costs approximately Rs 1 lakh/year. Premium should ideally be under 10 to 15% of your annual income to ensure sustainability.

Using Multiple Policies Instead of One Large Policy

If you need Rs 50 lakh coverage, taking two Rs 25 lakh policies with different maturity dates (one 20-year, one 25-year) is often smarter than one Rs 50 lakh policy. This staggers your maturity receipts across different life stages and provides more flexibility if you need to stop one policy during a financial hardship.

Call Ajay Kumar Poddar at 9415313434 to calculate your HLV and get an exact SA recommendation. He will run the numbers based on your income, existing loans, and family situation.