How much term insurance cover should I take?

Calculate all three standard methods — annual income x 20, monthly income x 200 and monthly expenses x 200 — and take the highest, then add outstanding loans and major future goals and subtract existing cover and liquid assets.

Is term insurance a waste of money if I survive the term?

No more than a health or motor policy is. You are buying protection for your dependants during your earning years, not an investment. The low premium is precisely what lets you buy a large enough sum assured.

Should a homemaker take term insurance?

The economic contribution of a homemaker is real, and several insurers now offer cover to homemakers subject to household income criteria. Cover should also be considered if there are joint loan liabilities.

Does term insurance qualify for tax deduction?

Under the old tax regime, premiums are eligible under Section 80C and the death benefit is generally exempt under Section 10(10D), subject to conditions. Under the new regime, most such deductions are not available, so buy for protection first and treat tax relief as secondary.

What is a good claim settlement ratio?

Look at the individual death claim settlement ratio published in IRDAI's annual report. Consistently above 97 percent over several years, along with a low claim pendency and reasonable turnaround time, is a healthy sign.

Insurance•10 July 2026•7 min read

How much term insurance do you actually need? The HLV methods explained

Three standard ways to size your cover, why the highest number usually wins, and what actually gets claims rejected.

Human Life Value (HLV) is the economic value your family loses if your income stops. Term insurance exists to replace that value. Most Indian families are under-insured not because cover is expensive, but because the sum assured was never calculated — it was picked to match a tax-saving budget.

Method 1: The thumb rule

Annual income x 20. Quick, crude and usually a reasonable floor. For an annual income of Rs 15 lakh, that is Rs 3 crore of cover.

Method 2: Income replacement

Monthly income x 200. This approximates the corpus needed so that the family can draw the same monthly income indefinitely. A monthly income of Rs 1.25 lakh implies Rs 2.5 crore.

Method 3: Expense replacement

Monthly household expense x 200. This sizes the cover to what the family actually spends rather than what you earn, which is more relevant if a large part of income goes into savings that would stop anyway.

Take the highest of the three, then add outstanding loans and large future goals (children's education and marriage), and subtract existing cover and liquid assets. Our Ideal Sum Assured calculator runs all three methods side by side.

Term plan or anything else?

Pure term insurance buys the largest cover for the lowest premium because there is no investment component. Endowment, money-back and ULIP products bundle protection with investment; the cover is typically a fraction of what the same premium would buy as term, and the returns are typically below what a diversified mutual fund portfolio has delivered over long periods. Keep protection and investment separate unless there is a specific reason not to.

Riders worth considering

Accidental death benefit — additional payout on accidental death.
Critical illness — lumpsum on diagnosis of listed conditions; useful when household savings are thin.
Waiver of premium — future premiums waived on disability or critical illness.
Increasing cover option — sum assured steps up over time to track inflation and income.

What actually causes claim rejection

1Non-disclosure of medical history, tobacco use or alcohol consumption in the proposal form.
2Understating income or hiding other policies at the time of application.
3Policy lapse due to unpaid premium.
4Missing or outdated nomination details.

Fill the proposal form yourself, disclose everything, and prefer a medical underwriting process over a no-questions-asked policy. Under Section 45 of the Insurance Act, a claim generally cannot be questioned after three years of continuous cover — but that protection assumes honest disclosure at inception.

Buy early, hold long

Term premium is locked at entry age and stays level for the whole policy term. Buying at 28 instead of 38 can cut lifetime cost substantially for the same cover. Choose a term that runs at least until your planned retirement age or until dependants become financially independent.

Insurance is the subject matter of solicitation. Figures are illustrative and based on rules applicable for FY 2025-26. Tax laws and product features change; confirm the current position before acting.