An Analysis on Various approaches used for Determining the Life Insurance cover for Policyholders in Life Insurance Industry in India

Life insurance is a contract between an insured and an insurer, where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon death of the insured person. This paper analyzes about the various approaches used for determining the life insurance cover for a potential life insurance policy holder. A sample portfolio of an individual is taken for the study and it applied in five different approaches for calculating the amount of life cover needed for that individual. The results provided by all the approaches are analyzed and based on which the appropriate approach, that can be used by the life insurance industry was found. This paper suggest Human Life Value (HLV) approach for calculating the amount of life cover to avoid underinsurance and over-insurance of an individual.