Last Updated on May 25, 2022 by Neera Bhardwaj

Human life is extremely unpredictable. One moment can be diametrically different from the next. To cover for uncertainties, we have insurances – financial securities that help alleviate the blow in difficult times. The suffering from the Covid-19 pandemic has made the need for insurance even more pronounced.

While buying life insurance is a must, many people struggle to select adequate life cover. If you find yourself asking questions like – What does insurance coverage mean? How much life insurance cover do I need? – then you are not alone. And, we have you covered. 

Here is a quick guide to all you need to know about life insurance coverage.

What is insurance coverage?

Insurance coverage is the total amount of potential financial losses that your insurance protects or covers for you in the event of an unforeseen crisis. It is your financial safety net against an unexpected loss. 

To have insurance coverage, you need to buy a policy and pay a monthly or annual premium for a certain amount of time. In return, the insurance provider pays for financial damages listed under that particular scheme. In essence, with insurance, you transfer your financial liability to the insurance company. 

There are different types of insurance that cover specific financial damages. For example, health insurance protects against an unexpected health crisis. Similarly, life insurance protects a person’s family in the event of death.

Different types of life insurance

A person’s sudden death not only comes with a huge emotional loss but can also cause a heavy financial burden, especially if the deceased person is the breadwinner. 

Life insurance ensures financial assistance to the deceased person’s family. Investing in life insurance is beneficial because:

  • It is a safety net for a family’s future financial needs.
  • It is essential for retirement planning
  • Most importantly, premium payment for life insurance falls under Section 80C and Section 10(10D) of India’s Income Tax Act, which means that you get tax benefits.

There are a few different kinds of life insurance:

A term insurance plan

This provides coverage for a specified period, like 30 yrs from the date of purchase.

Whole-life insurance

This provides coverage for your entire life and not just a specific period.

A retirement plan 

This uses a portion of your premium to create a pension fund that is available to you upon retirement.

A child’s plan

This covers the financial requirements of your children for their entire life. This also covers a lump sum death benefit to parents after death.

An endowment plan

This uses a portion of the premium for the death benefit, and you invest the rest.

A money-back plan 

This is a survival benefit scheme where a certain portion of the coverage is paid to you at regular intervals.

Unit linked insurance plans (ULIPs)

This invests a part of your premium into mutual funds, and the rest goes towards the death benefit.

Factors influencing life insurance cover

When purchasing life insurance and deciding on the amount of coverage, you should consider a few of the following factors.


Your income is the biggest factor when it comes to buying life insurance. This is because your life insurance will fall apart unless you keep up with your premiums. It is always safe to buy life insurance cover that has a premium requirement that your salary can support.


Age is a significant parameter in the purchase of life insurance. As you grow older, your financial liabilities are likely to increase. So the sooner you buy life insurance, the better. Moreover, buying life insurance at a younger age can also give you lower rates on premiums. 

Estimated working years

Most people plan a retirement of leisure after a lifetime of hard work. Planning your life insurance and premium payment in tandem with your working years can help you smoothly transition into a relaxed retirement.

Financial liabilities

You may have heard of families falling into financial debt upon the death of a member. This can happen if you have several financial liabilities, such as loans whose burden falls on your family in case of your untimely death. In such an event, having life insurance can prove to be a lifesaver for your loved ones.

Future plans

You must have some future goals and expectations for yourself and your loved ones—for example, foreign education for your children. Or, a permanent house for your family. Your future goals will determine the amount of life insurance coverage you need so that these goals can still be fulfilled even after you are gone.

How much coverage is good enough?

There is no straightforward answer to this question because your life insurance requirement will be unique to you. Experts often recommend purchasing insurance coverage that is at least 10 to 15 times your annual salary. But that number really depends on how the factors mentioned above play out for you.

Why is insurance coverage important?

Witnessing the Covid-19 pandemic taught humanity one thing – That anything can happen at any time. The world has never been more uncertain than it is today, and no one can really predict what’s in store for us in the future. Hence, insurance coverage is all-important. If you are still unconvinced, here are a few pointers on why insurance coverage is essential.

  • Insurance policies protect you against an uncertain future. It is a risk mitigation measure to ensure your sustenance and that of your loved ones.
  • Knowing that your future is secured will help reduce your present stress. 
  • Insurance policies are not just financial safety nets for individuals but also investments. As such, they have a significant role to play in the economic growth of society.


Life insurance is essential to ensure financial security in an increasingly uncertain world. To find the perfect life insurance for you, do thorough research on all the different policies available in the market and what benefits they offer. A renewable term insurance suffices for most people’s needs, but it is important to remember that your needs will be unique. And so you must find the right policy for you.

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