How much term insurance cover do I need? India guide (2026)
Most earners in India need term cover of 10–15 times annual income, plus loans and goals. Calculate your cover, choose the right term, check claim ratios and avoid riders you don't need.
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Quick answer: A good rule of thumb in India is term insurance cover of 10–15 times your yearly income, plus all outstanding loans and the cost of big goals like your children's education — minus savings you already have. For someone earning ₹12 lakh a year with a ₹40 lakh home loan, that usually means ₹1.5 crore to ₹2 crore of cover, kept until about age 60–65.
Key takeaways
- Term insurance pays only if you die during the policy term — that is why it is so cheap.
- Since 22 September 2025, individual life insurance policies, including term plans, are exempt from GST.
- Cover should last until your dependants are independent and loans are paid — usually till 60 or 65, not 85 or 99.
- Disclose every health condition and habit honestly; non-disclosure is the most common reason claims are rejected.
Step-by-step: calculate your cover
| Step | What to add or subtract | Example (age 32, income ₹12 lakh) |
|---|---|---|
| 1. Income replacement | Yearly expenses your family needs × years until you would retire (adjusted for inflation), or simply income × 10–15 | ₹12 lakh × 12 = ₹1.44 crore |
| 2. Loans | Home loan, car loan, personal loans outstanding | + ₹40 lakh |
| 3. Goals | Children's higher education, marriage, a parent's care | + ₹30 lakh |
| 4. Existing assets | FDs, mutual funds, PPF, EPF your family can use | − ₹15 lakh |
| 5. Existing cover | Employer group term, other policies | − ₹10 lakh |
| Cover needed | ≈ ₹1.89 crore → buy ₹2 crore |
Tip: Employer group cover ends when you leave the job. Count it only if you are confident you'll stay, or ignore it and buy enough on your own.
How long should the policy run?
Choose a term that ends when your family no longer depends on your income — usually when you plan to retire, your children are independent and your home loan is cleared. For most people that is age 60–65. Covering till 85 or 99 makes premiums much higher for years when you may not need protection. If you are taking a home loan, make sure the term runs at least as long as the loan. Use our EMI calculator to see how long the loan will last.
What to check before you buy
- Claim settlement ratio — the share of death claims an insurer paid in a year. IRDAI publishes these in its annual report; look for a consistent ratio above 97–98% over several years, and also check how quickly claims are paid.
- Solvency ratio — IRDAI requires at least 1.5; higher is safer.
- Premium payment option — regular pay is usually cheaper overall than limited pay.
- Medical tests — plans that do a full medical check-up up front are less likely to dispute claims later.
Warning: Do not hide smoking, alcohol use, existing illnesses or other policies. Within the first three years of a policy, an insurer can reject a claim for material non-disclosure. Under Section 45 of the Insurance Act, it can't question the policy on any ground after three years — but honest disclosure from day one is the only safe approach.
Riders: which ones are worth it
| Rider | Worth it? |
|---|---|
| Accidental death benefit | Optional; cheap, but your base cover should already be enough |
| Critical illness | Useful if you lack a separate health or critical-illness policy |
| Waiver of premium on disability | Good value — keeps your cover going if you can't work |
| Return of premium | Usually not — you pay far more and the "return" earns poor interest |
Tax and GST
Individual life and term insurance premiums became GST-free under GST 2.0 from 22 September 2025. Premiums qualify for deduction under Section 80C (now renumbered under the Income-tax Act, 2025) only in the old regime; most salaried people are now in the new regime, so don't buy insurance just for tax — see new vs old tax regime. Death benefits paid to nominees are tax-free.
Frequently asked questions
Is ₹1 crore term insurance enough?
For someone earning up to about ₹7–8 lakh a year with no large loans, often yes. With a higher income, a home loan or young children, ₹1 crore is usually too little — run the steps above.
Should a housewife or homemaker buy term insurance?
Yes, if the family would need to pay for childcare and household help. Many insurers cap homemaker cover based on the spouse's cover.
Can I increase my cover later?
Some plans offer "life stage" increases on marriage or childbirth without fresh medicals. Otherwise you can buy a second policy — many people hold two term plans from different insurers.
What happens if I survive the term?
With a pure term plan, nothing is paid. That is why it costs a fraction of endowment or ULIP plans. Invest the difference — see our SIP calculator.