How Much Term Insurance Cover Should You Have?

Your term insurance cover depends on many factors like your age, annual income, lifestyle, number of family members, etc. Life is uncertain. For a breadwinner of the home, it is essential to ensure that he/she has the financial resources required to meet the family's requirements especially when he/she is not around. Financial resources help make it easier for family members to manage day-to-day living costs. If you are looking to purchase term insurance, but are unsure about the term insurance cover amount, you can find all the details in this article.

Read more
Get ₹1 Cr. Life Cover at just ₹411/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
Tax Benefit
Upto Rs. 46800
Life Cover Till Age
99 Years
8 Lakh+
Happy Customers

*Tax benefit is subject to changes in tax laws. *Standard T&C Apply

** Discount is offered by the insurance company as approved by IRDAI for the product under File & Use guidelines

Get ₹1 Cr. Life Cover at just ₹411/month*
No medical checkup required
Save more with upto 10% discount
Covers COVID-19
View plans
Please wait. We Are Processing..
Get Updates on WhatsApp
By clicking on "View plans" you agree to our Privacy Policy and Terms of use

How Much Term Insurance Cover Should You Have? 

In general,

(Your yearly income) x (25-20 times) + loans/liabilities = Total sum assured in your term plan. 

Term plans come with affordable premiums, so paying them monthly/quarterly or annual will not be an issue. You can also consider purchasing riders if your income increases. The premiums increase with age, so make sure you buy your term plan at an early age. This way, they will be the same throughout your term tenure.

Yearly Income

Sum Assured (25x multiplier on annual income)

Sum Assured (20x multiplier on annual income)

INR 1 Lakh

25 lakhs

20 lakhs

INR 2 Lakhs

50 lakhs

40 lakhs

INR 3 Lakhs

75 lakhs

60 lakhs

INR 4 Lakhs

1 Crore

80 lakhs

INR 5 Lakhs

1 Crore 25 lakhs

1 Crore

INR 6 Lakhs

1 Crore 50 lakhs

1 Crore 20 lakhs

INR 7 Lakhs

1 Crore 75 lakhs

1 Crore 40 lakhs

INR 8 Lakhs

2 Crore

1 Crore 60 lakhs

INR 9 Lakhs

2 Crore 25 lakhs

1 Crore 80 lakhs

INR 10 Lakhs

2 Crore 50 lakhs

2 Crores

INR 15 Lakhs

3 Crore 75 lakhs

3 Crores

INR 20 Lakhs

5 Crores

4 Crores

INR 25 Lakhs

6 Crore 25 lakhs

5 Crores

INR 30 Lakhs

7 Crore 50 lakhs

6 Crores

The Human Life Value (HLV), is a figure that depicts the future value of income expenses, liabilities, and investments. This number is used to calculate how much money is needed to protect your dependents' lives with term insurance in the unfortunate event of your demise.

7 Factors are considered when evaluating the HLV of a person. These include:

  • The person's age
  • Occupation
  • The person's gender
  • Estimated retirement age
  • Yearly income
  • Work perks
  • The person's monetary information about the family 

Factors to Consider While calculating the Term Plan Cover

  1. Age

    The amount of insurance you need depends on your present age. You are likely to become your family's breadwinner if you are young (the late twenties and thirties). Your life's balance sheet is likely to have more liabilities than assets. Your assets will become equal to your liabilities as you earn and save more. This is the reason your life cover is less in old age compared to the young age.

  2. Present Operating Expenses of the Family

    Different people with different incomes may have different lifestyles. Your family is habitual to the lifestyle you provide. In the event of uncertainty, a lifestyle downgrade will not be easy for anyone. However, if the need requires so, one has no option but to downgrade his/her lifestyle. Even while doing so, meeting the basic lifestyle requirements cannot be discounted. So, consider calculating your family's operating expenses (monthly and annually) to calculate the term plan's cover. 

  3. Children's Education

    Education shapes a child's future. You would want your child to have the best education so that he/she can make informed decisions when he/she grows up. Keeping this in mind, consider calculating the number of years you will need the funds to support your child's future.

  4. Loans

    This is one of the most important factors to consider when calculating the term plan cover. Banks usually advise insuring your loan when you take one. It is good protection in case things go south. For example, these days, personal loans, car loans, and loans to purchase expensive gadgets are all common. Consider any unprotected loans and include them in your term plan cover calculation. This will assist in paying your loan back in your absence.

  5. Assets

    When calculating the cover for your term plan, consider the assets you have. They will influence your term plan cover. For instance, if you have purchased a car for 10 lakh Rupees and paid 6 lakhs, consider taking the rest 4 lakhs in your term cover calculation.

  6. Choosing of Riders

    Many insurers offer various add-ons (called riders) to make the policy more beneficial for the policyholders. These riders can be helpful if you have specific needs. However, these riders come at an additional charge. It is crucial to determine the need of a rider before adding it to your base term plan. If you don't find them useful, it is okay not to take them. However, some riders are highly recommended. For instance: Waiver of premium rider. If you (god forbid) become seriously ill or suffer a disability, this rider will waive all future premiums. In the event of your unfortunate demise, your family will be provided additional financial support by the accidental death rider.

  7. Premiums

    You are obligated to pay your premiums for any insurance policy you purchase. Though it is important to have full coverage, some people may go too far and buy more than they need. Your disposable income should also be considered when determining how much premium you will pay. Your policy can end up being lapsed if there is a default in premium payment.  

  8. Family’s Future Expenses

    You must consider other future expenses of your family also, like the marriage of your children. According to Indian orthodox traditions, marriage is a significant affair that is usually expensive. This is why you should also make sure your family doesn't face financial hardships in your absence. So, consider calculating a lump sum amount that will keep your children’s wedding bells ringing if you are not there.

    You can determine how much insurance coverage you need by taking the above factors into account. After you've identified your needs, you can compare the various insurance policies available on the market.

Final Word

Keeping these factors in mind while finalizing a term insurance plan can enable you to select a suitable policy. It can be a tedious task to go through the brochure of every insurance company to select a term insurance cover amount. The smart and easy way would be to go to an online platform to view the best deals on offer with a click of a button.

Written By: PolicyBazaar

Term insurance articles

Recent Articles
Popular Articles
What is Group Term Life Insurance?

29 Nov 2021

For individuals with financial responsibilities, term insurance...
Read more
Who Can Be Nominees in a Term plan?

29 Nov 2021

The main reason for buying a term plan is to make sure your...
Read more
Which Term Plan Does Not Require a Medical Exam?

29 Nov 2021

Term insurance is understood as the easiest form of life...
Read more
What Is the Procedure to Choose a Nominee In Term Insurance Policy?

29 Nov 2021

In the event of sudden death of the policyholder, a life...
Read more
What is a Term to Age Policy?

26 Nov 2021

Popular for its low-risk investment, term insurance is steadily...
Read more
LIC Term Insurance 1 Crore
If you have a LIC term insurance 1 Crore handy, you can cherish all your happy moments as you have made a fine...
Read more
Types of Deaths Covered & Not Covered by Term Life Insurance
Types of Deaths Covered and Not Covered by Term Insurance When it comes to securing the future of your loved ones or...
Read more
10 Questions You Should Ask Before Buying Term Insurance
10 Questions You Should Ask Before Buying Term Insurance There are various doubts faced by customers when it comes...
Read more
Term Insurance for NRI in India
Term insurance offers financial protection to the family of the insured in case of demise. Every bread-earner...
Read more
2 Crore Term Insurance Plan
The pandemic has surely generated a global panic and emphasised the importance of financial planning that would...
Read more
Download the Policybazaar app
to manage all your insurance needs.