Most people who buy life insurance pick a number that feels large enough — ₹25 lakh, ₹50 lakh, ₹1 crore without a clear method behind it. The result is that many families are significantly underinsured. Here is a practical framework for calculating the right amount.
The Income Replacement Method
The most widely used approach is to insure yourself for 10 to 15 times your current annual income. A 35-year-old earning ₹10 lakh per year would need ₹1 to ₹1.5 crore of cover. This ensures that the sum, if invested conservatively at 6–7%, provides an income close to what the family was living on.
Add Outstanding Liabilities
Home loan, car loan, personal loans — your cover should be sufficient to clear these in full, over and above income replacement. A family dealing with the loss of a breadwinner should not simultaneously be struggling with debt repayment.
Factor in Future Goals
Children’s education, wedding expenses, your own retirement corpus , a rough estimate of these needs, discounted to today’s value, gives a more complete picture of the cover required.
Subtract Existing Assets
EPF/PPF balances, other significant savings, or assets earmarked for family use can be subtracted from the total required. These will be available to your family regardless of what happens to you.
Review Every 3–5 Years
A pay increase, a new home loan, the birth of a child, or ageing parents who now depend on you – all of these increase the cover you need. A policy bought at 28 may be inadequate at 38.
What ₹1 Crore Cover Costs Today
With the 18% GST now removed from individual life insurance premiums (from September 22, 2025), a ₹1 crore term policy for a healthy 30-year-old non-smoker typically costs approximately ₹7,000 to ₹12,000 per year for a 30-year term, depending on the insurer. This is one of the most affordable periods in recent years to buy life cover.
Not sure if your current cover is enough? Draco Insurance can help you calculate the right sum assured and compare term policies from India’s leading life insurers. Visit dracoinsurance.in or call +91 7064106417.
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