By Vividha Jain, MBA · July 2026 · 6 min read
"10 to 15 times your annual income" is the answer you'll find in almost every article about term insurance — including some of ours. It's a reasonable starting point, but it's not actually a calculation, and for a lot of families it's either too low or unnecessarily high. Here's how we actually work it out with clients.
Term insurance exists to replace what you'd have earned, for as long as your family would have needed it. That means the real calculation has two parts: your family's ongoing living expenses, and how many years they'd need that income replaced (typically until children are financially independent, or a spouse reaches retirement/re-employment).
Not your income — your actual household spending. If your family spends ₹12 lakh a year to live comfortably, and you want that replaced for 20 years (say, until your youngest child is financially independent), that's already ₹2.4 crore of the calculation, before anything else.
Home loans, business loans, any personal loans — anything your family would otherwise have to pay off from savings or by selling assets. This should be added in full, since the point of term insurance is to prevent your family from inheriting your debt along with your absence.
Children's education costs and marriage expenses are the two big ones in most Indian households. Be specific: an engineering degree in India today costs meaningfully less than the same degree with a study-abroad component. Round numbers work fine here, but don't skip this step — it's often 30-40% of the total number.
Existing savings, investments, provident fund balances, and any existing life cover all reduce what new cover you actually need. This step is the one people skip most often, and it's the one that can save you from over-buying (and overpaying in premium) for cover you don't need.
A 35-year-old with ₹12 lakh annual household expenses, a 15-year home loan balance of ₹60 lakh, estimated future education/marriage costs of ₹80 lakh, and existing savings of ₹40 lakh:
Notice this comes out meaningfully higher than a flat "10x income" rule would suggest for many mid-career professionals — which is exactly why the generic multiple is a starting point, not a real answer.
Every year you wait, premiums rise — not just from age, but because any health condition that develops in the meantime can affect both pricing and eligibility. The calculation above tells you the right amount. The right time is usually now.
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