Term Insurance Explained: How Much Cover Do You Actually Need?

Factors That Push Your Number Up or Down

Your ideal cover is personal. Adjust the base figure for your situation:

• Number and age of dependents — younger children usually mean more years of support and rising education costs.
• Spouse's income — a working spouse who can sustain part of the household may lower the gap.
• Existing savings and assets — a large corpus or a paid-off home reduces what insurance must cover.
• Inflation — at around 6% inflation, expenses can roughly double in about 12 years, so sizing cover only to today's costs may fall short.
• Lifestyle and city — a metro family with school fees and EMIs typically needs more than a small-town household with lower costs.

A useful sanity check: if the payout were parked in a reasonably safe instrument earning a modest post-tax return, would it plausibly cover your family's yearly needs for the period they depend on it? Returns are never certain, so treat this as a rough guide rather than a precise promise.

Choosing the Right Term and Features

Policy term. Many people cover themselves until they expect to stop earning and their dependents become financially independent — often up to age 60 or 65. Paying for cover all the way to age 99 is rarely worth the extra premium for most, since by then accumulated savings may have replaced much of the need.

Claim Settlement Ratio (CSR). Check the insurer's CSR, published in IRDAI data — a ratio consistently above 95% is often read as a sign of reliable claim payouts, though it is one factor among several. This can matter more than a marginally lower premium.

Riders worth considering (each adds cost, so add only what genuinely fits your needs):

• Critical illness rider — pays a lump sum on diagnosis of listed illnesses.
• Accidental death benefit — an extra payout if death is due to an accident.
• Waiver of premium — future premiums are waived if you become disabled, subject to policy terms.

"Return of premium" variants give your premiums back if you survive the term, but they usually cost noticeably more for the same cover, which can dilute the cost-efficiency that makes a plain term plan attractive.