Subhendu Kumar Bal, President and Chief Risk Officer, SBI Life Insurance has said that the core purpose of life insurance is to financially protect your loved ones in your absence — by replacing lost income, repaying debts and supporting long-term goals like children’s education or retirement.
“Being underinsured means that your policy coverage is insufficient to meet these actual financial needs. For example, consider Raj, a 35-year-old professional with a `50 lakh policy. At first glance, this seems adequate. However, his family has a `70 lakh home loan and additional living expenses. In his absence, the insurance coverage couldn’t cover all liabilities – leaving his family financially vulnerable despite having insurance,” he said.
Bal said people often prioritize immediate expenses over insurance, limiting the funds available for adequate coverage. This can leave them vulnerable when unexpected events occur. “Group insurance provided by employers may be insufficient and may end if you change in jobs or become self-employed. Even outdated policies— marriage, children, loans — are often not reflected in existing insurance coverage. Over time, the real value of your insurance cover diminishes due to factors like increasing medical, education costs and the value of money decreasing with time’. Besides, many buy insurance mainly for tax benefits (Section 80C), not actual protection,” Bal said.
He advised that aim for a life cover of 10–15 times your annual income, accounting for debts and future financial commitments. “Update your policy after major life events like marriage, childbirth, home loans, or job changes, ideally every two years. Term plans provide high coverage at affordable premiums, consider riders for critical illness or disability to enhance protection,” he added.