How much term cover do you actually need?
Not a multiple of your salary. The honest number is the present value of the income you would be replacing, plus the debts somebody would inherit, less what is already covered — because a payout is invested and drawn down over years, not spent in one go.
Cover need is the present value of the income you'd replace, plus debts and goals, less cover and liquid assets you already have. Present-valued at a real return (return minus inflation) so it reflects that a lump sum, invested, is drawn down over years — not a naive income × years.
Why “income × 10” is the wrong shape
The usual rule multiplies annual income by ten, or fifteen, or twenty. The trouble is that the multiple does not depend on the one thing that matters most: how many earning years you have left.
- A 32-year-old with 28 years to retirement is replacing 28 years of income. Ten times salary covers barely a third of that.
- A 55-year-old with 5 years left is replacing 5 years. Ten times salary is roughly double what the income replacement alone calls for.
The same rule cannot be right for both. This calculator asks your age and your intended retirement age, and works out the years directly.
Why it is a present value, not income × years
The other half of the correction runs the opposite way. A lump sum is not stuffed under a mattress — it is invested, conservatively, and drawn down. So ₹12 lakh a year for 28 years is not ₹3.36 crore of cover. Discounted at a real return of about 3% — that is a return after inflation, not before — the present value is closer to ₹2.3 crore.
What to add, and what to subtract
- Add every debt somebody would inherit. For most Indian households the home loan is the largest single item, and it is the reason under-insurance hurts so specifically: a family that loses an earner and still owes ₹40 lakh may lose the house too.
- Add one-off goals you would want funded regardless — a child’s education is the usual one.
- Subtract cover you already hold, including any group policy from your employer. Group cover is real while you hold the job and disappears the day you leave, so it is worth counting separately from a policy you own.
- Subtract liquid assets — money reachable within days. Not your PF, not the house you live in.
Two things worth knowing before you buy
Protection and investment do not belong in the same product. A pure term policy pays out only on death and is startlingly cheap for that reason. Endowment and ULIP policies bundle investing into the cover, which is what makes the premium large and the cover small for the same money. Keeping them separate is almost always the cheaper way to reach both goals.
The MWP Act is worth asking about. A term policy taken by a married man under Section 6 of the Married Women’s Property Act, 1874, for the benefit of his wife or children creates a trust: the proceeds do not form part of his estate and are not available to his creditors. On a site about debt that is not a footnote — it is the difference between a payout reaching your family and a payout reaching your lenders. It has to be elected when the policy is issued, so ask at the application, not afterwards.
What this is not
Unowe does not sell insurance, is not registered with IRDAI, earns nothing from any insurer, and recommends no specific product. This is arithmetic on figures you supply, to give you a number to take into a conversation. Underwriting, medical history, existing conditions and the precise wording of a policy all matter and none of them appear here. Talk to an IRDAI-registered adviser before you buy, and read the exclusions.