How Much Term Insurance Cover Do You Really Need?

Why the number matters

Term insurance replaces the income your family loses if you are not around. Choosing a round figure like 50 lakh because it "sounds enough" is guesswork. The right number comes from your income, your loans and the years your family still depends on you.

The human life value method

A practical starting point:

1. Take your annual take-home income.
2. Multiply it by the number of earning years left (retirement age minus current age).
3. Add all outstanding loans — home, car, personal.
4. Add future goals such as college fees and a spouse retirement corpus.
5. Subtract existing savings, EPF, and any cover you already hold.

A worked example

Rahul is 32, earns INR 12,00,000 a year, has a INR 40,00,000 home loan and two children.

• Income replacement: 12,00,000 x 25 years, discounted for inflation and returns, is roughly INR 1.8 crore in present-value terms.
• Loans: INR 40,00,000.
• Education goal: INR 50,00,000.
• Existing savings and cover: INR 30,00,000.

Indicative requirement: about INR 2.4 crore of pure term cover.

Rules of thumb, and where they break

The "15 to 20 times annual income" rule is a fine sanity check, but it ignores loans and goals. Use it to validate the detailed number, not to replace it.

Common mistakes

• Buying cover only up to the loan amount.
• Stopping cover at 55 when dependants are still studying.
• Not disclosing health history, which is the single biggest cause of claim disputes.
• Forgetting to review cover after a salary jump, a new loan or a new child.

What to do next

Run your numbers in the Human Life Value calculator on the planning tools page, then review the output together with a qualified advisor before you decide anything.