How much life insurance do I need? A simple way to work it out

In short

• Add up your debts, your family's living costs for the years they would need support, and your children's education.
• Subtract the savings and cover you already have. What is left is the cover you need.
• As a quick check, many advisors suggest cover of about 10 times your yearly income.
• If the full amount is too expensive, start with what you can afford and add more later.

Step 1: What your family would need

• Debts: car or house finance, personal loans, and money owed to relatives.
• Living costs: your monthly household spending, multiplied by the years until your youngest child is independent.
• Education: school and university costs for each child.
• Big goals: a wedding fund, or finishing a house.
• A buffer for emergencies.

Step 2: What they would already have

• Savings, gold and investments.
• Income from property or a business that would carry on without you.
• Life cover you already hold, including group insurance through your employer, which usually ends when you leave the job.

Step 3: The gap is the cover you need

Take step 2 away from step 1. The difference is the sum assured your family needs.

A worked example

An example family: Imran is 35 and earns Rs. 150,000 a month. He is married, with two children aged 4 and 7.

The quick check: about 10 times your income

Imran's yearly income is Rs. 1,800,000, and ten times that is Rs. 18,000,000, close to the answer above. The rule of thumb is a good first check for a family with young children. A family with large debts or several children may need more; a single person with no dependants needs far less.

The sum above ignores rising prices, which make future costs higher, and the profit your family could earn on a lump sum, which helps. For a first estimate, a round number is enough.

Fitting it into your budget

• A savings plan with a large sum assured can be expensive. Many families combine a savings plan for their goals with extra, cheaper cover through a Term Insurance Rider on the same plan.
• Family Pension Plan pays your family a guaranteed income for 10 years if you die, which suits families who would rather have monthly money than one lump sum.
• Choose a premium you can keep paying for the whole term, and review your cover when your income rises, a child is born, or you take a loan.

Do not forget the parent at home

If a mother or father who stays at home dies, the family may need to pay for childcare and help in the house. Jeevan Saathi covers husband and wife under one policy, including a spouse who does not earn.

Questions people ask

Is 10 times my income enough?

It is a good first check for a family with young children. Work through the three steps for your own case: large debts or several children can mean you need more.

Should I insure my wife if she does not earn?

Yes, if the family would need to pay for childcare or household help without her. Jeevan Saathi covers husband and wife under one policy.

Does my employer's group insurance count?

Yes, but only while you work there. It usually ends when you leave, so do not rely on it alone.

How often should I review my cover?

Whenever your life changes: marriage, a new child, a new loan or a big rise in income. Otherwise, every few years.