How much term insurance do you actually need?

“Ten times your annual income” is easy to remember and wrong for most households — too little for a young family with a home loan, too much for someone at 55 with grown children and no debt.

The replacement method

Start from what the money has to do. Add up: the annual expenses your family would still have, multiplied by the number of years until your youngest is independent; every outstanding loan; anticipated one-time costs such as education and weddings. Subtract existing savings, EPF, and any cover you already hold. The remainder is your sum assured.

Adjust for inflation

Expenses in year fifteen are not today’s expenses. Run the annual figure through an inflation calculator at 6% before multiplying by the number of years, or you will under-insure by a third.

Why term, and only term

Term insurance buys the largest sum assured per rupee of premium because it has no investment component. A ₹1 crore cover for a healthy 30-year-old typically costs ₹10,000 to ₹15,000 a year. The same premium in an endowment policy buys perhaps ₹8 lakh of cover and returns around 4–5% on the savings part. Separate the two jobs.

Riders worth considering

Waiver of premium on disability is usually cheap and sensible. Accidental death benefit is popular but pays only in narrow circumstances. Critical illness cover is often better bought as a standalone health product where you can compare the definitions.

The disclosure rule that decides your claim

Declare everything: smoking, alcohol, existing conditions, family history, and any earlier policy that was declined. Almost every rejected term claim traces back to non-disclosure at the proposal stage, not to a technicality in the wording. A higher premium honestly priced is a policy that pays.

Buy early

Premiums are locked at the age you buy. The same ₹1 crore cover bought at 35 rather than 28 typically costs 45% more for the whole term, and any condition diagnosed in those seven years may make it unavailable at any price.