Term cover: how much is enough — and how much is too much?
Why ten times annual income is the term-insurance benchmark for most Indian families, what a ₹1 crore policy really costs at 30, how to adjust for loans and dependants, and the four mistakes to avoid.
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: ten times your annual income
Mr. Fino benchmarks term cover at ten times your annual income, in pure term and nothing else. Earn ₹8 lakh a year and the benchmark is ₹80 lakh. The multiple is not plucked from the air: it is roughly what a family needs to replace a lost income for the years that matter most, once the payout is invested conservatively and inflation is allowed for.
The premiums below are the ones your own report quotes, read off the same age table the engine uses — roughly ₹9 a month for every ₹1 lakh of cover at 30, and ₹18 at 40.
| Annual income | Benchmark cover (10×) | Monthly premium at 30* |
|---|---|---|
| ₹5 lakh | ₹50 lakh | about ₹450 |
| ₹10 lakh | ₹1 crore | about ₹900 |
| ₹20 lakh | ₹2 crore | about ₹1,800 |
*Indicative only, for a healthy non-smoker. 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 there is no pass mark for this: term cover is worth up to 14 of the protection pillar's 20 points and it scales in proportion, so half the benchmark earns half the points and the shortfall is shown to you in rupees rather than as a verdict. The full scoring method sets out the rest.
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 benchmark here is a flat one: a family floater of ₹5 lakh or more takes the full six points of the protection pillar, anything smaller takes three, and none takes none. It is flat rather than income-linked because a hospital charges what it charges regardless of what you earn. A floater plus a super top-up is the cheapest route to ₹10 lakh and above.