How Much Term Insurance Do I Need in 2025?

Let’s face it—life is unpredictable. And while we can’t always control what happens next, we can plan for it. That’s where term life insurance steps in.

More and more people today are waking up to the importance of financial protection. We insure our cars, our homes, even our gadgets—but when it comes to protecting our family’s future, term insurance remains one of the most essential and underrated financial tools.

Now comes the big question: How much term insurance do I need? Or, more broadly, how much life insurance do I need to make sure my family stays financially secure if something happens to me?

It’s not a one-size-fits-all number. Your ideal coverage depends on your income, expenses, debts, goals, and more. And in this guide, we’ll break it down for you—step by step.

By the end of this article, you'll understand how much term life insurance you need and why that number matters so much.

If you need help choosing the right policy, feel free to chat with us on WhatsApp or book a call at a convenient time. No spam — just honest insurance advice.

What is Term Insurance Coverage?

Before we jump into the calculations, let’s start with the basics.

Term insurance is a pure life cover product. You pay a premium for a fixed period (say 30 years), and if something happens to you during this term, your nominee receives the sum assured. That’s it—no maturity benefit, no frills, just straightforward financial protection.

But what does coverage actually mean here?

In the context of term life insurance, coverage refers to the sum assured—the amount your family will receive if you’re no longer around. It’s the financial cushion that replaces your income, repays debts, funds life goals, and supports your loved ones through uncertain times.

So when you ask, “How much term life insurance do I need?”, what you’re really asking is:

“What amount would my family need to maintain their lifestyle, cover key expenses, and achieve their goals—without facing financial strain—if I were no longer here?”

And that’s exactly what we’re going to help you calculate.

Why Knowing the Right Coverage Amount is Crucial?

Think choosing a term insurance cover is as simple as picking a big number that feels right? Not exactly.

Choosing the right coverage amount is crucial because getting it wrong can have serious consequences.

Let’s start with under-insurance. Imagine this: You buy a ₹50 lakh term plan, thinking it’s sufficient. But when your family actually needs it, it barely covers a few years of expenses and leaves your spouse juggling loans, school fees, and rising inflation—without enough support. That’s the harsh reality of being underinsured.

On the other hand, over-insurance isn’t ideal either. Sure, it might seem smart to take a ₹10 crore cover, but if it’s way beyond what your family actually needs, you’re probably overpaying premiums that could’ve been invested elsewhere more efficiently.

That’s why answering “How much term insurance should I take?” isn’t just a financial decision—it’s a responsibility. The correct coverage safeguards your family’s future by replacing your income for years to come, paying off any outstanding debts, funding life goals like education or marriage, ensuring your spouse has a secure retirement, and giving your loved ones peace of mind, even in your absence.

So the next time you wonder, “how much life insurance should I have?”, remember: the right amount isn’t just about numbers—it’s about ensuring stability for your family.

How Much Term Insurance Do I Need?

Now let’s answer the million-rupee question—how much term insurance do I need?

Truth is, there’s no one-size-fits-all number. Your ideal coverage depends on your lifestyle, dependents, financial goals, and existing wealth. But don’t worry—we’ve got a few proven methods to help you figure this out. Let’s break them down:

a) Income-Based Method (HLV + Income Replacement)

This method combines the logic of Human Life Value (HLV) and Income Replacement—two of the most widely accepted ways to calculate term insurance coverage.

The idea is simple: your life insurance should cover the total income you would have earned until retirement, so your family doesn’t miss out financially if something happens to you.

Formula: Annual income × Number of working years left

Example:

If you earn ₹10 lakhs annually and plan to work for the next 30 years,

₹10L × 30 = ₹3 Cr term insurance coverage

This method works best if you’re the sole or primary earner in the family. It ensures your family continues to live comfortably, even in your absence.

One drawback would be that this assumes that your income won’t change in the next few years. Think about increments, job changes, or even starting up your own business.

b) Expense and Liabilities Replacement Method

Prefer to calculate based on actual expenses rather than income? This one’s for you.

Here, you consider all the future financial needs of your family—monthly expenses, children’s education, marriage, retirement for your spouse, all of these adjusted for inflation—and then add any outstanding liabilities like home, education or personal loans.

Formula:

Total future expenses + Outstanding liabilities = Cover required

This method is ideal if you're a planner who wants pinpoint accuracy. It also ensures you're not under or over-insured since it's based on actual life goals. This is the method that we at Ditto use as well to give you an estimate of your required cover.

Disclaimer: This formula has been simplified to avoid confusion. The real number depends on a variety of factors which can’t all be accounted for here. Please use this calculator or talk to our certified experts to precisely know the ideal cover for you. 

c) Underwriter’s Rule

Just want a ballpark figure to start with? Use the Underwriter’s Rule—a thumb rule that suggests you take a term cover that’s 10 to 25 times your annual income.

Example:

If you earn ₹10 lakhs a year, your ideal term cover should be somewhere between ₹1 Cr to ₹2.5 Cr.

• If you’re younger, with more financial goals ahead, aim for the higher end (20–25x)
• If you are older and already have wealth or fewer responsibilities, the lower end may suffice (10-20x)

While it’s not foolproof, this method gives you a quick estimate when you're short on time or just starting your planning journey.

Pro Tip: Want a precise figure tailored to your profile? Try out this handy term insurance calculator. Just plug in your expenses and liabilities, and voila, you'll get the number that actually makes sense to you.

5 Key Steps to Calculate the Right Term Insurance Cover

When people ask, “How much life insurance should I have?”—this is the section we wish they’d read first. A well-planned term cover is a combination of your current responsibilities, future goals, and how well you’ve saved up so far. Here’s a simple 5-step breakdown to calculate the right term insurance amount:

Step 1: Factor in Monthly Household Expenses

Start with your family’s regular monthly expenses—things like groceries, rent, electricity, school fees, etc. This is your baseline. But don’t stop there.

Now factor in inflation. What costs ₹50,000 a month today might inflate to over ₹1 lakh a month in 15–20 years. Your term cover should reflect that rising cost of living.

Also, think about your dependents. How many people rely on your income? The answer to "How much life insurance should I have?" depends heavily on how much your family will need to maintain their current lifestyle without you.

Step 2: Evaluate Liabilities

This includes everything you still owe—a home loan, car loan, personal loan, or even an education loan you're repaying. If you're not around, these don't magically disappear. Your family will still be responsible for them.

That's why your term plan should be large enough to clear these debts completely. This ensures your loved ones aren't left with financial burdens during an already tough time.

Wondering how much term insurance you should take? Start by adding up all your outstanding liabilities. It's a non-negotiable part of your total cover.

Step 3: Plan for Life Goals

Now, think long-term. Your kids’ higher education, their wedding, or even your spouse’s dream business—these goals need funding, too.

Estimate the cost of these future milestones. For example, an MBA for your child might cost ₹30–50 lakhs in the next 10–15 years. These should be part of your term insurance planning.

Step 4: Retirement Corpus for Spouse

If you're the primary breadwinner, chances are your spouse depends on you, not just today—but for decades to come. Even after your kids are settled, your partner will need a retirement corpus to live comfortably.

Include a portion in your term cover specifically for this. A retirement fund that can generate regular income (say, through annuities or fixed deposits) ensures their financial freedom well into old age.

Step 5: Consider existing wealth and investments

While existing investments can technically be subtracted from the required term cover, we generally do not recommend doing so. Most investments are earmarked for wealth creation, long-term goals, or emergencies—not specifically to replace income or settle liabilities in the event of an untimely death.

Keeping them separate ensures that your family has a dedicated financial safety net through insurance while your investments continue to serve their intended purpose. Additionally, these investments can act as a buffer if your coverage calculation falls short due to unexpected inflation, rising expenses, or unforeseen liabilities.

In short, it’s safer and more practical to treat insurance as pure risk protection and allow your investments to work independently toward your financial goals.

Tenure of the Term Insurance Plan

Figuring out your term insurance tenure is just as important as choosing the right coverage amount. Here’s how you can break it down step by step:

• Start with your retirement age in mind Most people retire between 60 to 65. Your term plan should ideally last until then, covering your active income years.
• Consider your current ageIn your 20s or 30s? A 30–35 year term gives you coverage till retirement.In your 40s or 50s? Opt for a shorter term that aligns with your remaining working years.
• Factor in your financial responsibilities Ensure your policy covers big-ticket goals like your child’s education, home loan, and spouse’s financial security.
• Account for wealth accumulation Ideally, by retirement, you’ll have built enough wealth to protect your family without needing term insurance.
• Be mindful of premiums Longer tenure = higher premium. Plus, the longer the term, the more your cover should account for inflation.
• Use the dependency rule Your plan should last as long as someone depends on your income. That’s your "sweet spot" for policy duration.

Pick a term that protects your family during your active earning years. Once they no longer depend on your income, you won’t need life cover—and that’s when your plan can end.

Eligibility for Term Insurance

Before you buy a term plan, it's important to know if you qualify. Here’s a quick look at the basic eligibility criteria.

• Application Age: Typically between 18 to 65 years
• Income: Regular income source preferred; proof may be required
• Health: Insurability assessed via medical history or health check-ups
• Nationality: Must be an Indian citizen, NRI, or PIO (as accepted by insurer)
• Occupation: Some high-risk jobs may have restrictions or higher premiums

Meeting these criteria ensures a smoother application process and better chances of approval.

Things to Consider Before Choosing Term Insurance Cover

Before you lock in your term insurance cover, there are a few personal factors that deserve a closer look. Your coverage should be tailored to your life—not just based on a random number or online calculator. Here’s what you need to weigh:

Age and family stage

Your age plays a major role in deciding both the tenure and the coverage amount. If you’re in your 20s or early 30s, you can opt for a longer tenure and a higher cover at a lower premium. Plus, if you’ve just started a family or are planning one soon, you’ll want to ensure your policy reflects those growing responsibilities.

Number of dependents

How many people rely on your income? Is it just your spouse—or do you have aging parents, young kids, or both? The more dependents you have, the higher your coverage should be. Term insurance is essentially a safety net for your loved ones, so you’ll want that net to be wide enough to catch everyone.

Income stability and future projections

Are you in a stable job or running a business with a fluctuating income? Are you expecting your income to grow significantly in the next few years? These factors should guide your cover amount. If your earnings are likely to rise, you may want to future-proof your policy by opting for a slightly higher coverage now.

Medical history and lifestyle

Smokers, people with chronic illnesses, or those with a family history of serious conditions might face higher premiums—or even coverage limitations. But don’t let that discourage you. It’s still important to get a term plan early while you're insurable and can lock in better rates. Plus, a healthy lifestyle can work in your favor when it comes to underwriting.

The bottom line? Term insurance isn't one-size-fits-all. Customizing your cover based on these factors ensures that your policy actually works when your family needs it most.

Does Age Impact How Much Term Insurance You Need?

Short answer? Yes—age plays a huge role in deciding not just the cost of your premium but also how much coverage you really need.

In your 20s: Low premium, high coverage

This is the best time to buy term insurance. You're young, healthy, and premiums are at their lowest. Even without dependents, locking in a large cover early means long-term peace of mind at a low cost.

In your 30s–40s: Match cover to responsibilities

This is when major liabilities kick in—marriage, kids, loans. Your cover should now reflect financial goals like education, home loans, and your family's lifestyle. If you bought a policy earlier, consider a top-up.

In your 50s and beyond:

Balance need and costApproaching retirement, you might not need as much cover if your kids are independent and loans are paid. But if your spouse still relies on your income, a policy could still help—just remember, premiums are much higher now.

What is the moral of the story? The earlier you start, the easier it is to secure the right coverage—at the right price. Your age doesn't just affect how much term insurance you can get but also how much you should get.

How Much Term Insurance is Needed for a 35-Year-Old? (Mini Case Study/Example)

Let’s take a real-world example to understand how much term insurance is ideal for a 35-year-old.

• Age: 35 years
• Annual income: ₹10 lakh
• Monthly household expenses: ₹40,000
• Liabilities: ₹50 lakh (home loan)
• Children’s education goal: ₹30 lakh
• Existing savings: ₹10 lakh

Now, let’s apply three standard methods to calculate the ideal coverage.

1. Underwriter’s rule

A common rule of thumb recommends a term cover that’s 10x to 25x your annual income. So, if you earn ₹10L annually, your recommended coverage would fall between:

• Lower range: ₹10L × 10 = ₹1 Cr
• Upper range: ₹10L × 25 = ₹2.5 Cr

But here's the catch — your age also plays a big role in determining your eligibility.

In general, most term plans are offered to individuals between 18 to 65 years of age. Some whole-life policies can even cover you up to 99 years. But when it comes to calculating the maximum cover you’re eligible for, insurers use an income multiplier based on age — the younger you are, the higher the multiple.

Here’s a breakdown:

Age	Multiplier
18 – 35 years	25x
36 – 40 years	20x
41 – 45 years	15x
46 – 50 years	12x
51 – 55 years	10x
56 – 65 years	5x

So, under this method, the recommended cover lies between ₹1 Cr to ₹2.5 Cr — depending on your financial goals, liabilities, and risk appetite.

2. Expense + liability replacement method

This method focuses on future financial commitments and ongoing living costs.

• Future household expenses: ₹40,000/month × 12 months × 25 years = ₹1.2 Cr
• Outstanding home loan: ₹50 lakh
• Children’s education cost: ₹30 lakh
• Total Cover Needed: ₹1.2 Cr + ₹0.5 Cr + ₹0.3 Cr = ₹2 Cr

Note: We’re not deducting existing savings here, as they’re typically earmarked for investments, emergencies, or retirement — not risk cover.

3. HLV + Income Replacement Method

This approach calculates the economic value of your remaining working years.

• Annual income: ₹10L
• Working years left: 60 - 35 = 25
• Human Life Value (HLV): ₹10L × 25 = ₹2.5 Cr

Final Recommendation: ₹2 Cr+ Term Insurance Cover

Different methods suggest a range between ₹1 Cr to ₹2.5 Cr; this cover hits the sweet spot because it covers liabilities and key life goals, provides 10–15 years of income replacement, and balances affordability with adequate protection.

This is ideal for a 35-year-old earning ₹10L p.a., with dependents and moderate liabilities. As your income and responsibilities grow, revisit your term cover every 5 years to stay aligned with your financial goals.

Note: We’re not deducting existing savings here, as they’re typically earmarked for investments, emergencies, or retirement — not risk cover.

Bonus Tip: Term Insurance Riders to Consider

Buying term insurance is a great first step. However, riders can play a huge role in turning a basic plan into a complete protection shield. Think of them as power-ups for your policy—small add-ons that offer big-time support during life's curveballs. Here are the top 3 riders worth considering:

Critical illness rider

This rider pays a lump sum if you're diagnosed with a major illness like cancer, heart disease, kidney failure, or stroke (as listed in the policy). A life-threatening illness doesn’t just bring emotional stress—it can wipe out savings due to expensive treatments and long recovery periods. This rider ensures you have funds when you need them most—without dipping into your family’s future. However, it is supposed to act as an income replacement, not as a replacement for health insurance - which is still required to cover treatment costs. 

Accidental Total and Permanent Disability (ATPD) Rider

This is an add-on to term insurance that provides financial support if the policyholder suffers a life-altering disability due to an accident. If the insured becomes permanently unable to work, the rider offers a lump sum payout or waives future premiums, helping manage medical expenses, daily living costs, and income loss. It's a smart way to enhance your base cover and ensure long-term financial stability for your family during tough times.

Waiver of premium rider

If you suffer a permanent disability or are diagnosed with a critical illness (as per policy terms), all future premiums are waived, but your policy continues as-is. Life can throw situations where earning an income becomes impossible. This rider keeps your policy active even when you can't afford to pay, ensuring your family remains protected no matter what.

These riders are optional, yes—but in reality, they complete your safety net. While the base term plan takes care of "what if I’m not around," these riders prepare you for the tough situations where you’re alive but financially vulnerable.

And the best part? They're often affordable add-ons—you get more protection without dramatically increasing your premium.

Choose wisely. Riders could be the reason your plan stands strong when it matters the most.

How Does Term Insurance Coverage Work in India?

Understanding how term insurance coverage works in India can give you peace of mind—knowing that if something were to happen to you, your loved ones would receive timely support without unnecessary stress or confusion.

Here’s a simple breakdown of how the coverage and claim process unfolds:

Claim Process Overview

When the unfortunate happens, your nominee can raise a claim by submitting essential documents like:

• The policyholder’s death certificate
• The original policy documents
• A valid photo ID of the nominee
• Any additional medical or hospital records (if applicable)

The specific documentation requirement can vary across insurers. Once these documents are submitted, the insurance company verifies the claim. If everything is in order, the claim is usually settled within 30 days.

For early claims (within 3 years of policy issuance), the insurer may conduct a more detailed investigation. But as long as the policyholder discloses all information honestly, there’s rarely a problem.

The Nominee’s Role

The nominee is the person you've named to receive the sum assured upon your death. It could be your spouse, parent, child, or anyone you trust.

The nominee plays a central role—they initiate the claim, submit the documents, and receive the payout. That’s why it’s crucial to keep your nominee details up-to-date and inform them about the policy and claim steps while you’re around.

Pro tip: Always mention multiple nominees or assign percentages in case something happens to one nominee.

IRDAI Regulations Ensuring Transparency

The Insurance Regulatory and Development Authority of India (IRDAI) has laid down strict rules to ensure fair treatment of policyholders and nominees. These include:

• Claim settlement timelines: Insurers must settle claims within 30 days (or 120 days if investigation is required).
• Free-look period: You get 30 days to review the policy and cancel it with a full refund.
• Mandatory disclosures: All charges, benefits, and exclusions must be transparently listed in the policy document.

These regulations are designed to prevent claim rejections due to technicalities and protect families during vulnerable times.

In India, term insurance coverage is built to be simple, secure, and transparent—provided you disclose everything honestly and keep your policy active. Once you do that, you can rest assured that your loved ones will receive the financial support they need, quickly and efficiently, when it matters the most.

Best Term Insurance Plans in India 2025

1. HDFC LIFE Click 2 Protect Super: HDFC Life Click2Protect Super is a comprehensive term insurance plan that stands out for its high customizability and strong claim settlement track record, though it tends to be relatively expensive for many profiles. The plan boasts a Claim Settlement Ratio of 99.2% and an exceptionally low complaints ratio of just 2 per 10,000 claims, indicating reliable service. It offers useful add-ons like accidental death benefits, waiver of premium on disability or critical illness, total permanent disability cover, and even the option to increase cover in line with inflation. 

A notable in-built feature is the zero-cost option, which allows you to exit the policy during a specified window and get your premiums refunded. While the critical illness benefit covers 60 illnesses and includes a shorter-than-average waiting period of 90 days, it comes with a 15-day survival clause and only pays on top of the base cover—not as an accelerated payout. The terminal illness benefit offers partial payouts, and while the plan includes the return of premium and top-up options, these are either costly or limited to life events like marriage or childbirth. Overall, it's a solid plan from a reputed insurer but not the most budget-friendly choice out there.

2. ICICI Prudential iProtect Smart: ICICI Prudential iProtect Smart is a well-rounded term insurance plan that balances affordability and features well, especially for salaried individuals and smokers. It offers competitive premiums, a decent claim settlement ratio of 97.52%, and a solid amount settlement ratio of 92.1%, with fewer complaints than the industry average—making it a fairly reliable option. One of its standout features is the Life Stage Benefit, which lets you increase your coverage after major milestones like marriage or childbirth. It also includes useful in-built features like a Zero Cost Option, allowing you to exit the policy during a specific window and get your premiums back, and a terminal illness benefit that pays out the full cover upon diagnosis. 

The plan allows for an accidental death benefit add-on and offers critical illness coverage for 34 illnesses, with immediate payouts upon diagnosis—though the benefit is paid from the base cover (accelerated payout) and has a longer-than-average 180-day waiting period. The waiver of premium is only triggered upon permanent disability due to an accident, and while there's no inflation-linked top-up or payout for total permanent disability, the plan still holds strong for those looking for decent coverage at a fair price. It’s especially appealing if you want basic protection with a few thoughtful add-ons without breaking the bank.

3. Axis Max Life Insurance Smart Term Plan Plus: The Axis Max Life Smart Term Plan Plus is a flexible term insurance plan that offers seven different coverage options, but the "Regular (Level Cover)" and "Smart Cover" variants are the real standouts. The Regular option is a simple, no-frills plan, while the Smart Cover gives you 1.5X coverage for the first 15 years—ideal if you want extra protection during your high-responsibility years. The plan comes packed with essential add-ons like accidental death benefit, critical illness cover (covering 64 illnesses), waiver of premium on disability or critical illness, and even a zero-cost exit option that refunds your premiums if you exit during a specified period. Women also get access to thoughtful perks like Lifeline Plus and Maternity Cover. That said, the plan doesn’t allow you to top-up your coverage later or link your coverage to inflation, which can be a drawback if you’re looking for long-term adaptability. Still, for most people, it’s a well-rounded and customizable option that ticks a lot of boxes.
4. Bajaj Allianz Life eTouch II: Bajaj Allianz Life eTouch II is a well-rounded term insurance plan that offers affordability, strong claims performance, and solid rider benefits. It includes a Zero Cost Option, so you can walk away with your premiums refunded if you exit at a certain point. There’s also a waiver of premium for permanent disability due to accidents and a life-stage benefit that lets you increase coverage after major milestones like marriage or childbirth. Its critical illness rider covers up to 60 conditions, pays out on top of the base sum insured, and comes with a relatively short 90-day waiting period and a 14-day survival clause—quicker than many in the market. Women and non-smokers also enjoy highly competitive pricing. Bajaj Allianz’s claim settlement (99.11%), low complaint ratio (4.4 per 10,000 claims), and amount settlement ratio (93%) are all impressive, especially when compared to industry averages. That said, there are a few misses—you don’t get the option to link your cover to inflation, and there’s no lump sum payout for total permanent disability. But overall, if you’re looking for a plan that balances price, features, and reliability, eTouch II is a pretty compelling pick.
5. TATA AIA Sampoora Raksha Promise: The TATA AIA Sampoorna Raksha Promise is a solid pick if you're looking for a highly customizable and reasonably priced term plan. It’s especially great for people with lower annual incomes who still want substantial coverage. The plan comes with strong claim metrics—boasting a 98.9% claim settlement ratio, a low complaints ratio of just 3 per 10,000 claims, and an impressive 92.7% amount settlement ratio. It also offers useful add-ons like critical illness cover, which pays out a lump sum on top of your term cover if you’re diagnosed with any of the 40 listed illnesses. The accidental death and total permanent disability benefits add an extra layer of protection, and you also get a waiver of premium if you're ever critically ill or permanently disabled. There are a few nice built-in features, too, like the life stage benefit, which lets you increase your coverage after big life events and a partial terminal illness payout. That said, it does fall short on a couple of fronts. There's no zero-cost option, which some other plans offer, and you can’t increase your coverage automatically with inflation. But these aren’t major deal-breakers for most people. Overall, if you're after a dependable term plan with solid features and strong claim performance, this one is definitely worth considering.

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Conclusion

When it comes to term insurance, one size does not fit all. The right coverage isn’t just a random round number—it’s a carefully calculated financial safety net that protects your loved ones when you're not around.

Whether you’re in your 20s, 30s, or even your 50s, figuring out how much term insurance you need depends on your income, liabilities, future goals, and existing wealth. A ₹1 or ₹2 Cr cover might sound like a lot, but for many families today, it may fall short in the long run.

Instead of guessing, use trusted methods like the Underwriter’s Rule, Human Life Value (HLV), or Expense Replacement Method to get a realistic estimate. Better yet, speak to a trusted advisor who can help you personalize your plan.

Remember, this isn’t just about numbers—it’s about peace of mind. Knowing that your family will be financially secure no matter what? That’s the real value of term life insurance.

So the next time you wonder, “How much term insurance do I need?” or “How much term life insurance do I need?”—you’ll have your answer. A smart one. Backed by math, not myths.

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