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T E R M L I F E C O V E R · I N D I A E D I T I O N 2 0 2 6 T H R E E W A Y S T O A R R I V E A T O N E N U M B E R The Size of the Hole. Life cover is not a product decision. It is an arithmetic question about the money your household would still need if your income stopped tomorrow. INCOME TO REPLACE GOALS TO FUND DEBTS TO CLEAR LESS WHAT YOU HAVE 3 M E T H O D S C O M P A R E D 1 W O R K E D E X A M P L E To 60 T H E T E R M T H A T M A T T E R S T U R N T H E P A G E → 0 1
B E F O R E Y O U B E G I N N O T E T O T H E R E A D E R A crore is a round number, not an answer. Most people arrive at their life cover the same way: a figure that sounded large, or whatever the agent's illustration showed. Neither is connected to what the household would actually need. The right number is buildable. It comes from four things — the income to replace, the goals still to be funded, the debts somebody would inherit, and what you have already saved against all of it. To run your own figures, this guide on how much term insurance you need works through the same arithmetic. W H A T ' S I N S I D E 01 Three ways to size the cover 04 What changes the number 02 The four things you are adding up 05 Your own sizing sheet 03 One household, worked through 06 When to revisit it HOW TO READ Every figure here is illustrative arithmetic, not a quote. Your own numbers will move the answer considerably. NOT ADVICE General information only, not insurance, tax or financial advice. Premiums, terms and tax treatment differ and change. T H E S I Z E O F T H E H O L E 0 2
§ 0 1 · M E T H O D S T H R E E R O U T E S , O N E N U M B E R 01 I N C O M E M U L T I P L E Ten to fifteen times your income The rule of thumb everyone quotes, and a reasonable place to start. Multiply annual income by ten if you are older with few dependants, by fifteen or more if you are young with a long earning runway ahead. USE IT — As a sanity check on whatever the other methods produce. 02 H U M A N L I F E V A L U E What your future earnings are worth today Takes the income you would have earned until retirement, subtracts what you would have spent on yourself, and discounts the rest back to a present value. Thorough, and sensitive to every assumption you feed it. USE IT — When income is high and the earning runway is long. 03 N E E D S B A S E D Add what is owed, subtract what exists Build the number from the household's actual obligations — living costs for a set number of years, education, loans — then deduct savings and existing cover. Slower, and the only method that survives a hard question. USE IT — As the primary method. The rest are cross-checks. T H E S I Z E O F T H E H O L E 0 3
§ 0 2 · C O M P O N E N T S W H A T Y O U A R E A D D I N G U P Four columns, then one subtraction. Everything that belongs in the calculation falls into one of these. Anything else is noise. A D D · T H E L A R G E S T Income replacement Annual household expenses multiplied by the years your family would need support — usually until the youngest child is independent. A D D Goals still to fund Education and marriage costs, priced at what they will cost then rather than what they cost now — a gap of a decade or more changes the figure sharply. A D D Debts somebody inherits Home loan, car loan, any personal borrowing. A family grieving should not also be servicing an EMI, or selling the house to clear one. A D D · O F T E N F O R G O T T E N A cushion Immediate expenses, and a reserve so the family is never forced to sell an asset in a hurry. S U B T R A C T What already exists Savings, provident fund, investments earmarked for the family, and any personal policy already in force. S U B T R A C T W I T H C A R E Employer cover Count it lightly, if at all. It ends the month the job does, which may be the same month everything else changes. INCOME REPLACEMENT GOALS DEBTS LESS ASSETS T H E S I Z E O F T H E H O L E 0 4
§ 0 3 · W O R K E D O N E H O U S E H O L D Thirty-four, two children, one income. Household spending of ₹9 lakh a year, a home loan outstanding, and savings already built. The arithmetic runs like this. COMPONENT AMOUNT Living costs — ₹9 lakh a year, for 20 years ₹1.80 cr Education for two children ₹60 lakh Home loan outstanding ₹40 lakh Immediate expenses and cushion ₹10 lakh Less: savings, provident fund, investments − ₹25 lakh Less: personal cover already in force − ₹15 lakh Cover required ≈ ₹2.5 cr T H E C R O S S - C H E C K Fifteen times an annual income of ₹18 lakh gives ₹2.7 crore — close enough to the needs-based figure to trust both. When the two methods disagree sharply, the assumptions are usually wrong, not the arithmetic. Round up rather than down: the cost of a slightly larger cover is small, and the cost of a short one falls entirely on somebody else. T H E S I Z E O F T H E H O L E 0 5
§ 0 4 · A D J U S T M E N T S W H A T M O V E S T H E N U M B E R I N F L A T I O N Today's expenses, tomorrow's prices A figure built on current spending understates what the family will need in year twelve. Either inflate the annual expense before multiplying, or accept that the cover should sit at the higher end of your range. T E R M Cover the earning years, not a lifetime A term running to about 60 or 65 covers the years when your income is what holds the household together. Paying for cover far beyond that usually buys less than it costs. S T R U C T U R E Both earners, and the one who is not paid In a dual-income household each earner needs cover sized to their own contribution. A homemaker's work has a replacement cost too, and it is rarely insured at all. P R O D U C T Term first, riders second, bundles last Plain term cover buys the largest sum for the smallest premium. Riders for accidental disability or waiver of premium are worth pricing; investment-linked policies rarely deliver a serious sum assured. T H E S I Z E O F T H E H O L E 0 6
§ 0 5 · W O R K S H E E T Y O U R O W N N U M B E R Fill this in with your figures. Use annual household spending, not income, for the first line. The result is a starting figure to take to a quote, not a final answer. C O M P O N E N T Y O U R A M O U N T Annual household expenses × years of support Education and other goals still to fund Home loan and other borrowings outstanding Immediate expenses and cushion Less: savings, provident fund, investments Less: personal life cover already in force Cover required T H E N C H E C K Compare the total against ten to fifteen times your annual income. If the two are far apart, revisit the assumption behind the largest line. J A R G O N , D E C O D E D Sum assured The amount the insurer pays on a claim. The only number in the policy that matters here. Term plan Pure life cover for a fixed period, with no maturity value. The cheapest way to buy a large sum assured. Human life value The present value of the income you would have earned, less what you would have spent on yourself. Rider An add-on to a base policy — disability or waiver of premium, priced separately. Nomination The record of who receives the payout. Out of date more often than anything else in the file. T H E S I Z E O F T H E H O L E 0 7
C L O S I N G W H E N T O R E V I S I T I T Size it once. Revisit it four times. The number you arrive at today is right for today's household. It stops being right at exactly the moments when nobody is thinking about insurance, which is why the review dates matter as much as the arithmetic. ON MARRIAGE A second person now depends on the income, and often on the same loan. ON A CHILD The largest single addition to the number, and the longest one to fund. ON A LOAN Any borrowing somebody would inherit belongs in the cover from the day it is drawn. ON INCOME A significant rise changes the standard of living the family would be protecting. Early When term cover is cheapest and easiest to underwrite. Honest How the proposal form must be filled, in writing. Known Somebody should know the policy exists and where it is. The Size of the Hole — a flipbook on sizing life cover in India, 2026 edition. Written for general understanding only, not as insurance, tax or financial advice. The worked example is illustrative arithmetic with rounded figures; premiums, product terms and tax treatment differ between insurers and change with regulation. Confirm your own position with the insurer or a licensed adviser before acting. E N D O F F L I P B O O K 0 8