How much Term Insurance Do I need?

What is Term Insurance?

Why is it Important To Understand How Much Coverage You Need?

Factors That Decide The Coverage Required

Methods To Calculate How Much Term Insurance Is Enough For You

Now, let us check out the calculation: 


Expenses Amount
Future household expenses (+) ₹ 90 lacs
Outstanding Liability (+) ₹ 70 lacs
Corpus for future milestones (+) ₹ 30 lacs
Retirement corpus for spouse (+) ₹ 70 lacs
Liquid Assets (-) ₹ 40 lacs
Total Term Insurance cover that Suresh needs ₹ 2.2 Crore

Hence, by this method, Mr Suresh's total insurance cover required would be ₹2.2 crores. 

While this is the most commonly used method to calculate how much term insurance a person needs, other methods also provide an indicative figure of the coverage requirement.

To keep calculations simple, we usually apply the basic thumb rule as follows to calculate HLV:


Age Approx HLV
18-35 25 x Annual Income
36-45 20 x Annual Income
46-50 15 x Annual Income
51-60 10 x Annual Income

For example, for a 30-year-old earning 10 lacs annually, the ideal life cover would be 25 x 10,00,000= 2,50,00,000.

FAQs About How Much Term Insurance Do I Need

What is the right age to buy a Term Plan?

The minimum age to buy a Term Plan is 18 years, and there is no "right age". The key to intelligent planning is starting early. 

Do I get a Maturity Benefit if I survive the tenure of my Term Plan?

Term Plans usually do not have any savings component. They are an affordable option designed to secure your family's finances in case of your untimely demise. However, a variant of the Term Plan called ‘Term Plan with Return of Premium’ or TROP offers a complete return of the basic premiums paid. 

Can I increase my Term Plan Sum Assured?

Depending on your policy's terms and conditions, some policies provide a feature to increase the sum assured at milestones like marriage, childbirth, home loan etc. 

Can I add a Rider to my existing Term Plan?

Usually, you can add Rider at the time of renewing your Term Plan. However, it is best to check the terms and conditions of your policy. 

Should I declare myself a Smoker if I don't smoke on a regular basis?

Yes, if you have smoked in the last 12 months, you should declare yourself a smoker. If you don't declare and it is found at any later stage, your policy might get cancelled without any benefits. 

Should I include my spouse's income when calculating the coverage amount?

Yes, it's advisable to consider your spouse's income when determining the coverage amount to ensure that both incomes are adequately replaced if one spouse passes away.

Do I need term insurance if I don't have any dependents?

While the primary purpose of term insurance is to provide financial security for dependents, it can still be beneficial even if you don't have dependents. It can cover your funeral expenses and any outstanding debts, relieving your loved ones from these financial burdens.

Should I consider inflation when determining the coverage amount?

Yes, it's essential to factor in inflation when calculating the coverage amount. The coverage should be sufficient to account for rising living costs over time.

How often should I review my term insurance coverage?

It's advisable to review your term insurance coverage regularly, especially when significant life events occur, such as marriage, the birth of a child, or a change in financial circumstances.