Insurance is an essential thing for every one of us. Be it our life, health, property, vehicle, we need to take insurance. Sometimes, like vehicles this is stipulated by law. However, at times, when one wishes to get an insurance cover, it is not clear how much cover is needed. One needs to carefully select the cover, as it will affect premiums paid and the coverage in case of any eventuality.

Usually, identifying life insurance cover is toughest. In this article we will look at various ways in which we can identify required life insurance cover and auto insurance cover for an individual.

Identifying life insurance cover

Identifying life insurance cover is a little tricky. If you will like to identify your life insurance needs, you can choose any one of the three following approaches:

- The Human Life Approach

- Needs Approach

- Capital Needs Analysis Approach

Dr. Solomon Hubener is credited for developing the human life approach. In human life approach, the cover taken needs to equal the present value of the capitalized value of his/her future net earnings. The idea is that any dependents must not suffer from loss of income and be in financial duress. In this approach, the cover is calculated taking into account, age gender, occupation, net present income etc. For calculations, only income after-tax is taken into consideration.

In needs approach, one has to look at current income, assets, liabilities, risk profiles, financial and personal goals. In earlier approach, we did not account for any liabilities, but in this approach we take care of any liabilities that may be there. This approach assumes that life insurance cover has to provide for all needs of family/ dependents after death.

The third approach to calculate the insurance needs is the capital needs approach. In this approach, adequate money is invested so that income from investment provides for any needs, while the principal sum remains safe for use. All the three approaches are used by people for identifying life insurance cover.

Identifying auto insurance cover

Auto insurance cover is needed for coverage in case of loss of vehicles, any accident where you are injured or you injure someone. Though, your cover limit for accident can't be calculated, it is a guess, of how much you will like to pay in case you cause an accident. This liability is merely a guess. Your cover will depend on fact whether you wish to take a comprehensive cover or not.

If you find it tough to calculate your insurance cover needs, just go to internet and look at insurance websites. There are many websites which offer online calculators, you can put in your data and they will give an approximation of how much cover you should take.

You should carefully identify your insurance needs and take premium as in case of any eventuality, you and your family will have this cover to fall back on.