Term cover: how much is enough — and how much is too much?

Term insurance is the cheapest, most powerful financial product most Indian families under-buy — and a few over-buy after a persuasive sales call. Here is a straight answer to the two questions that matter: how much cover is enough, and when is more cover just wasted premium.

The working rule: 20× your annual income

The Mr. Fino methodology benchmarks ideal term cover at roughly 20 times your annual income. Earn ₹8 lakh a year, and the target is around ₹1.6 crore. That multiple isn't plucked from the air — it's what it takes for a family to replace a breadwinner's income for a couple of decades, once you account for inflation and conservative investment of the payout.

*Indicative market ranges only — premiums vary by insurer, age, health and smoking status. Always compare current quotes.

Why a multiple beats a "feels right" number

A ₹50 lakh policy sounds enormous until you do the arithmetic: invested conservatively at ~7%, it produces about ₹29,000 a month before tax — for a family that was living on a ₹1 lakh monthly income. Cover that's pegged to income scales with the life it actually has to replace. In your Mr. Fino report, term cover at 80% or more of the ideal counts as adequate and earns score points; anything below shows up as a quantified gap in rupees.

Adjust the multiple for your life

• Add: outstanding loan balances (home loan especially — your family shouldn't inherit an EMI), plus large committed goals like children's education.
• Subtract: existing cover from other policies and investments that could realistically be liquidated.
• Dependents matter most: more dependents or a single-income household pushes you toward the full multiple; no dependents at all is the one case where term cover can genuinely wait.

The four common mistakes

• Buying investment-linked policies for protection. Endowment and ULIP products bundle mediocre insurance with mediocre returns. Buy pure term for protection; invest separately.
• Stopping at what the employer gives. Group cover is usually 2–3× salary and vanishes the day you resign. Treat it as a bonus, not a plan.
• Hiding health details. A claim rejected for non-disclosure is the worst outcome money can buy. Declare everything; the premium difference is small.
• Waiting for a "better time". Premiums are locked at the age you buy. The same cover at 40 costs roughly double what it does at 28.

Don't forget the other half: health cover

Term insurance protects your family from losing you; health insurance protects your savings from a hospital bill. The Mr. Fino benchmark is health cover of about 2× annual income, with a ₹5 lakh floor — and one hospitalisation can burn through years of careful saving without it. Your report scores both gaps separately, so you can see which one to close first.