So as you can see, there are no fixed parameters for buying insurance just like there aren't any fixed parameters to determine what the perfect insurance cover should be. Insurance needs greatly vary from one person to the other you so you should thoroughly asses your insurance needs before you fix the right cover for yourself.
Factors to consider before determining the cover:
Age - Age is a very important factor here. While there are always exceptions usually young people, in their early twenties, opt for term plans. Term plans cover your life for a specific period of time. This is suitable for youngsters as they are usually unmarried and free of family duties. Term plans are also cheaper than whole life insurance plans and so it becomes easier for a person at the beginning of his career to afford it.
Responsibility - This is one of the main factors to consider while choosing an insurance cover. You have to assess the responsibilities you have and what would happen to them if you were gone. Do you have aged parents to support? Is your wife a homemaker and completely dependent on you? Do you have children who need to finish their education and then settle down? Have you taken loans and need to pay EMIs? Ideally you should have an insurance cover large enough to provide for all these after your death.
Health - This is another factor that needs to be considered. If your health is fragile and there is a chance that you won't survive for very long, you must cover your family adequately. There is, of course, no guarantee that everyone will live for as long as they desire and a healthy person may even meet with an accident. However, if you are exposed to greater risks, view it as a warning and buy sufficient insurance cover for your family.
Finances in the family - The next factor that you have to look at is the financial health of your family. You need to determine how much income your family earns without your help (parents' pension, spouse's salary, etc). You then need to calculate the difference and see exactly how much assistance they will need if your income is wiped out. This will help you calculate the cover appropriately.
Insurance is a modern day boon and everyone must take full advantage of it. You can buy as much insurance as you want, provided you have the requirements and finances.
So assess your needs and see exactly how much cover you and your family will require if something unexpected were to happen. This will help you determine the right insurance cover. You must only buy insurance after assessing your own needs, not after assessing the insurance portfolio of others.
The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal