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Life Insurance is a product, which offers protection against risk of death. In case of death, the full sum assured is made available under a life assurance policy, whereas under other savings schemes, the total accumulated savings alone will be available. Life Insurance can also be used as a means of saving for one's future. There are a number of Life Insurance products, which in addition to life cover also provide the means of investing one's income. The sum as per the policy will be received only after a period of time. This amount thus provides for old age. After a period of 3 years, if the policyholder finds that he is unable to continue payment of premiums he can surrender a policy for a cash sum. A life insurance policy is acceptable as a collateral security for a personal loan by financial institutions. A policyholder can take a loan from his insurance company against the security of his life insurance subject to certain conditions. The Indian Income Tax Act provides tax concessions to the policyholder both on payment of premium and on the maturity amount
There is no actual number, but mostly it is a calculations depending on how much the insured earn. For instance, it can be calculated by multiplying the annual income by 7, it also can be calculated by adding the number of years in which the younger kid will turn 21.
The most important method is by calculating the actual needs of a family and adding a percent to consider inflation.
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