The wrong way to decide
"I'll take ₹50 lakhs. Sounds like a good number."
That's how most people buy life insurance. Random number, random policy, hope for the best.
But life insurance isn't about round numbers. It's about making sure your family can maintain their life if you're not around.
Let's figure out the real number.
The Human Life Value method
This is the most scientific way to calculate your need. Don't worry.it's simpler than it sounds.
Step 1: How much does your family spend yearly?
Add up everything your family needs:
- Monthly expenses × 12
- Children's school fees
- Rent or home loan EMI
- Other recurring costs
Let's say this comes to ₹8,00,000 per year.
Step 2: Multiply by years of dependency
How many years will your family depend on your income? If your youngest child is 5, they'll likely need support for another 20 years.
₹8,00,000 × 20 = ₹1.6 Crores
But wait.inflation means ₹8 lakh today won't buy the same things in 10 years. A simpler rule: multiply annual expenses by 10-15.
₹8,00,000 × 12 = ₹96,00,000 (roughly ₹1 Crore)
Step 3: Add major future expenses
- Children's higher education: ₹20,00,000
- Children's marriage: ₹15,00,000
- Outstanding home loan: ₹30,00,000
Total: ₹65,00,000
Step 4: Subtract what you already have
- Current savings: ₹10,00,000
- Existing life insurance: ₹15,00,000
- Investments: ₹5,00,000
Total: ₹30,00,000
Final calculation
Life insurance need = Income replacement + Future expenses – Existing resources
= ₹1,00,00,000 + ₹65,00,000 – ₹30,00,000
= ₹1.35 Crores
The quick rule of thumb
Don't want to do all that math? Use this:
Life cover = 10-15 times your annual income
Making ₹12 lakhs per year? Get ₹1.2 to 1.8 Crore coverage.
It's not perfect, but it's better than a random guess.
"But that's so much! The premium will be huge!"
Here's the thing about term insurance.it's shockingly affordable.
For a 30-year-old non-smoker:
- ₹1 Crore cover for 30 years
- Premium: Around ₹10,000-12,000 per year
- That's less than ₹1,000 per month
You probably spend more on streaming subscriptions.
Don't forget to review
Your life changes. Your insurance should too.
Got married? Review.
Had a child? Review.
Took a home loan? Review.
Got a raise? Review.
Do this exercise every 2-3 years.
Get a proper calculation
Every family is different. The formulas above are starting points.
For a precise calculation based on your specific situation including your income, debts, goals, and existing coverage, talk to us.
It's a 30-minute conversation that could make a massive difference to your family's future.