How Much Term Insurance Do I Need? Exact Cover by Salary (2026)

Short answer: most earning Indians need term insurance of 15 to 20 times their annual income, plus any loans they owe. On a ₹12 LPA salary that is about ₹1.8–2.4 crore. But the right number is personal — a 28-year-old with no kids and a 38-year-old with a home loan and two children need very different covers. This guide gives you the exact formula, two worked examples, a salary table, 2026 premiums by age, and the mistakes that leave families under-insured.

Method 1: The 15–20× income rule (2-minute answer)

Take your annual income, multiply by 15 if you are in your late 30s or 40s with fewer working years left, and by 20 if you are younger or have young children. Then add every loan you owe — home, car, personal — because your family should not inherit EMIs.

The rule is a good sanity check, but it ignores how much your family actually spends, your savings, and your goals. For a number you can defend, use Method 2.

Method 2: The needs-based formula (the accurate answer)

The annuity factor answers: “How big a lump sum, invested safely, can pay ₹1 every year for N years while prices rise?” We assume the payout earns about 2% more than inflation each year (a conservative real return). That gives these factors:

How long is “support”? Usually until your youngest child turns about 25, or until your spouse retires, whichever is later. If your parents depend on you, think about their life expectancy too.

Step-by-step: what to include and what to leave out

• Yearly expenses: household spending your family will still have without you — rent, groceries, school fees, utilities, parents’ medical costs. Leave out your own personal spending, commute and EMIs (you add loans separately).
• Loans: outstanding principal of home, car, education and personal loans. Check today’s balance in your loan app or use our EMI calculator.
• Goals: children’s higher education and wedding, a parent’s care fund — at today’s cost (the 2% real return already handles inflation).
• Subtract: FDs, mutual funds, EPF, PPF, stocks and any personal life cover you will keep. Don’t subtract your home or emergency fund, and don’t count employer group cover.

Worked example 1: Rahul, 32, ₹12 LPA, home loan, one child

Rahul’s employer gives a ₹30 lakh group cover. He ignores it, because if he changes jobs or gets laid off at 45, he would have to buy cover again at a much higher premium. Curious what a ₹12 LPA salary leaves in hand each month? See 12 LPA in-hand salary.

Worked example 2: Priya, 28, ₹8 LPA, single, supports parents

Single with no dependents at all? You may not need term insurance yet — but buying a modest cover at 25–28 locks in a low premium for 30+ years. Many people buy ₹1 crore early and add more later when they marry or take a home loan.

How much does term insurance cost in 2026?

₹1 crore cover till age 60, non-smoker, median of five plans (nyvo premium data, May 2026). Smokers pay noticeably more. Your quote depends on health, income, city and medical tests. Because individual life insurance premiums have had nil GST since 22 September 2025, the quoted premium is now the full amount you pay.

Tip: covering ₹2 crore rarely costs twice as much as ₹1 crore — insurers usually give lower rates per lakh on higher slabs. Always compare a ₹1.5 crore and ₹2 crore quote before settling.

Till what age should the cover run?

• Till 60–65 for most people — roughly your retirement age, when your loans are paid off and your investments can take over.
• Avoid “till 85/99” plans by default. They cost much more, and by 70 most people no longer have dependents who need income replacement.
• Consider a longer term if you had children late or have a dependent with special needs.

How to pick the insurer: check claim settlement

A term plan is only as good as the claim your family can collect. Look at the individual death claim settlement ratio (by number of claims) for a few years, not just one.

Source: IRDAI Handbook on Indian Insurance Statistics 2024-25, as compiled by Artha Engine. All large insurers settle 97%+ of claims; honest disclosure on your proposal form matters more than a 0.3% difference.

7 mistakes that leave families under-insured

1. Counting employer group cover. It disappears with your job.
2. Ignoring loans. A ₹50 lakh home loan alone needs ₹50 lakh of cover. See EMI for a ₹50 lakh home loan.
3. Buying LIC endowment or ULIP “for insurance”. ₹10,000 a year buys about ₹1 crore of term cover — but only ₹2–3 lakh of cover in many savings-cum-insurance plans.
4. Hiding smoking, alcohol or medical history. This is the most common reason claims are rejected.
5. Never reviewing cover. Revisit after marriage, a child, a home loan or a big raise.
6. Not adding a nominee — or telling them. Register your spouse or parents as nominees and share the policy details.
7. Waiting to “earn more first”. Every year you wait, the premium rises — and a new health issue can make you uninsurable.

Tax benefits of term insurance

Under the old tax regime, term premiums count towards the ₹1.5 lakh deduction limit for life insurance, PPF, ELSS and similar investments — see our 80C deductions list. The new tax regime gives no deduction for premiums. In both regimes, the death benefit paid to your nominee is generally tax-free. Not sure which regime suits you? Read new vs old tax regime.

Frequently asked questions

Related guides and calculators

• CTC vs in-hand salary
• 80C deductions list
• How much SIP for ₹1 crore?
• Prepay home loan: reduce EMI or tenure?
• EMI calculator

Sources: nyvo premium data (May 2026) · IRDAI handbook via Artha Engine · Nil GST on life insurance (Business Standard). Last checked 31 October 2026. Figures are estimates for guidance, not tax or financial advice. How we research and fact-check.