But the real questions that need to be answered are: Do I need insurance? What are the parameters that define my need for insurance? What does insurance mean to you? What does insurance mean to agents/sellers offering you the insurance products? (Select insurance as you would select your life partner)

Definition of life insurance in general terms: The basic purpose of life insurance is to protect an individual's dependants from financial loss in the event of his or her untimely death.

Is your definition of life insurance the same as defined above? Why do you buy insurance? Are you buying to protect your family financial needs in case of any unfortunate event such as death or disability? Or are you buying it for the following reasons:

1. To cultivate saving habits as you are a spendthrift with no saving plan on head or on paper

2. Are you buying it for the purpose of tax planning as your chartered accountant told you to do so?

3. Are you buying it because insurance is the only investment you are aware of and have no idea about other investment options?

4. Are you buying it because your friend is an insurance agent and he told you to do so and that he also did the same thing?

The basic purpose of asking you these questions is to find out for yourself the reasons you bought insurance in past or you may buy in future. This will clarify that, is it bought objectively with some purpose like protecting family or is it just an abrupt or emotional decision with out any reason on why you are buying it?

With my experience, these are my findings and my own opinion on the same:

1. Very few people buy insurance with proper understanding on whether they need insurance and if yes, then for how much they need it and is it worth the price?

In my opinion the need for life insurance is substantial in following cases:

• You are young, and if you have a family that depends on you for the financial support then insurance is most important for you. In such a situation a term insurance with pure life cover is generally advisable considering that person does not have any liability.
  
  
• You are running a business with continuous liability, then in such a situation an endowment policy should be a good option.
  
  
• You have a very high personal loan (where the liability is greater than 50% of your assets or the monthly installment paid is more than 25% of your income); secure your family by purchasing a term loan against the liability, which will tend to reduce along with the repayment of the liability. Generally loans are sanctioned along with such insurance coverage. Kindly make sure it is covered sufficiently.
  
  
• How much is needed is something that requires objective and subjective analysis and parameters may differ on each case but as a general rule. There are two methods to calculate the amount of insurance required. In simple terms we can define as follows. This knowledge can help you asking right questions to your insurance advisors with regard to how much coverage is required.