How Much Insurance Cover Do You Really Need? Not Too Much, Not Too Little
June 28, 2025
How Much Insurance Cover Do You Really Need? Not Too Much, Not Too Little
When it comes to life insurance, one question we hear all the time is:
“How much cover should I take?”
Some say 10x your annual income.
Others say ₹1 crore is enough.
But here’s the truth: Life insurance is not one-size-fits-all.
It’s not just about a number — it’s about protecting your family’s future lifestyle if something happens to you.
Let’s break it down, so you can stop guessing and start planning.
📌 First: What Is Life Insurance Really For?
Life insurance isn't for you.
It’s for the people who depend on your income — your spouse, kids, parents, or even business partners.
It replaces the financial support you provide today, so your loved ones can:
- Maintain their lifestyle
- Pay off any loans
- Fund future goals (education, marriage)
- Cover everyday expenses
So, how much is that worth?
🧮 The Formula: A Smarter Way to Calculate
Here’s a simple 5-step method to estimate how much life cover you really need:
✅ Step 1: Annual Income × 10 to 15
Start by multiplying your annual income by 10 to 15 (depending on your age and responsibilities).
📌 Example:
If you earn ₹8 lakh/year:
₹8 lakh × 15 = ₹1.2 crore
This amount roughly replaces your future income for your family.
✅ Step 2: Add All Outstanding Loans
Include any liabilities like:
- Home loan
- Car loan
- Business loan
- Credit card dues
📌 Example:
Home loan = ₹40 lakh
Car loan = ₹5 lakh
Add ₹45 lakh to your insurance need.
✅ Step 3: Add Big Future Expenses
Think about major upcoming costs:
- Children’s education
- Wedding funds
- Aging parent care
📌 Example:
Child’s education goal = ₹25 lakh
Add this too.
✅ Step 4: Subtract Current Investments/Savings
If you already have assets like:
- FDs, Mutual Funds, PPF, EPF
- Real estate (non-residential)
- Existing life insurance
📌 Example:
You have ₹10 lakh in mutual funds + ₹5 lakh in PPF
You can subtract ₹15 lakh from the total.
✅ Final Step: Put It All Together
| Component | Amount |
|---|---|
| 15x Annual Income (₹8L) | ₹1.2 crore |
| Loans (home, car) | ₹45 lakh |
| Future Goals (child education) | ₹25 lakh |
| Minus existing savings | ₹15 lakh |
| Total Life Cover Needed | ₹1.75 crore |
So in this case, the person should aim for ₹1.75 crore in term life insurance.
💬 Common Myths You Should Ignore:
❌ “I’m young, I don’t need insurance.”
→ You’ll never get term insurance this cheap again — starting early saves money.
❌ “₹50 lakh is enough for anyone.”
→ Not if your family’s lifestyle costs ₹40,000/month and your loans total ₹30 lakh.
❌ “I already have company insurance.”
→ That ends when you leave the job — it’s not reliable for long-term protection.
🧠 Pro Tips Before You Buy:
- Always choose Term Insurance — pure protection, no investment drama
- Lock in early (premium stays fixed for the policy term)
- Choose coverage till age 60–65, not 99 (unless needed)
- Review your cover every 5 years or after major life events (marriage, kids, home loan)
💡 Final Thought:
Life insurance isn’t about fear. It’s about love, care, and responsibility.
It’s about giving your family financial dignity — even in your absence.
Don’t guess the number.
Plan for it. Because their future deserves more than "maybe it's enough."
Need Help Calculating Your Ideal Cover?
At Prospera Wealth, we help you:
- Calculate the exact insurance you need
- Compare term plans
- Choose based on features, claim ratio, and premium — not ads
📞 Call: 7030651651
📩 Email: info@prosperawealth.in
🌐 Visit: www.prosperawealth.in
🛡️ Because protecting your family is the most important investment of all.