How Much Life Insurance Do You Really Need in India? A Simple Guide for Real People

Most people in India have life insurance.
But do they have enough life insurance?

That’s the real question.

A lot of people either go by what the agent tells them, or they buy a round figure like ₹50 lakh or ₹1 crore because it “sounds good.” But when something actually happens, that number may not be enough.

So, let’s break it down simply — how much life insurance do you actually need, and how do you figure that out without using complicated formulas?

This blog is for real people, not finance experts. Let’s begin.

Why Life Insurance is Not About Returns

Before we talk about numbers, here’s a simple mindset shift.

Life insurance isn’t about returns, it’s about replacement.

If you are not around tomorrow, how will your family manage everything you were handling today — your income, your EMIs, your kids’ fees, the rent or loan, and the everyday expenses?

The amount of life cover you choose should be enough to replace your income and settle your responsibilities.

If it isn’t, the insurance is only giving false peace of mind.

Step 1: Multiply Your Annual Income by 20

Start with this simple rule:
Take your yearly income and multiply it by 20.

If you earn ₹8 lakh a year, that’s ₹1.6 crore. This amount acts as income replacement for the next 20 years for your family.

Some people use 15x, some use 20x. But with inflation, 20x is safer — because expenses increase every year.

Step 2: Add Major Financial Responsibilities

Apart from income replacement, think about the big expenses that will come up even if you’re not around:

• Children’s education (₹10–20 lakh)

• Wedding expenses (₹10 lakh or more)

• Home loan or personal loans (₹10–50 lakh)

• Parents’ medical care

Let’s say your calculations come up to ₹30 lakh in responsibilities.

Now your insurance cover should be:
₹1.6 crore (income replacement) + ₹30 lakh (goals) = ₹1.9 crore

Step 3: Subtract Your Existing Assets or Policies

If you already have savings or investments that your family can use, subtract that from the total.

For example:

• ₹10 lakh in FD

• ₹5 lakh in employer-provided life cover

Now your actual required cover is ₹1.9 crore – ₹15 lakh = ₹1.75 crore

That’s your personal ideal life insurance cover.

Why ₹1 Crore Isn’t Always Enough

A lot of term insurance ads say, “₹1 crore term plan at ₹500/month.” Sounds great, right?

But let’s say you have a family, kids, and a loan.

Will ₹1 crore last your spouse for 15–20 years?
Can it cover school and college fees?
Will it handle rising costs of living?

In many cases, the answer is no.

If you’re in your late 20s to late 30s and earning more than ₹6–7 lakh per year, chances are you need a cover of ₹1.5 to ₹2 crore — not just ₹1 crore.

What Happens If You Take Less Cover?

Let’s say you only took ₹50 lakh cover. It feels good on paper, but when life hits:

• Loan EMI: ₹25,000/month

• Kids’ education: ₹10 lakh

• Monthly living: ₹30,000/month

₹50 lakh will be used up in just a few years. After that, your family may struggle.

This is the reality most people ignore until it’s too late.

The Right Time to Buy Is Always “Now”

The younger you are, the cheaper the premium. And once you buy it, the premium stays the same for the entire policy term.

Even if your health changes or you start earning more later — the premium won’t change.

So, the earlier you act, the smarter the decision becomes.

Final Thought: Don’t Leave Gaps in Protection

You work hard to give your family the best life. Don’t let that protection disappear just because you didn’t calculate the right cover.

Buying life insurance isn’t just a financial step. It’s a sign that you care deeply for your loved ones — even in your absence.

Need Help Choosing the Right Policy?

At PolicyZar.com, we help real people — like you — compare life insurance plans, calculate the right cover, and connect with trusted companies like LIC, HDFC Life, Tata AIA, Max Life, and more.

No confusion. No pressure. Just clarity.

👉 Visit www.policyzar.com and myinsurancedost.com for more interesting and useful information about insurance.

Let’s make your decision simple — and smart.