Term Insurance: How Much Cover Do You Actually Need?

By Nitish Bharadwaj · Published Jun 11, 2026 · 5 min

The right term insurance cover replaces lost income, clears outstanding loans, and provides enough corpus for dependants to maintain their lifestyle without the policyholder. This guide presents three methods for calculating adequate cover — income replacement, human life value, and needs analysis — and explains how outstanding home loan balance, number of dependants, spouse's income, and existing savings affect the final sum assured required.

The standard advice says "10× your income." That's a starting point, not the answer. Here's a more accurate formula that accounts for your actual financial obligations.

The DIME Formula

DIME stands for: Debt (home loan, car loan, personal loans), Income replacement (monthly income × 12 × years until 60), Mortgage/rent you want to clear, and Education costs for children. Add these up for a more accurate cover amount.

Which Term Insurance Plan to Buy

Plans such as HDFC Life Click 2 Protect Super, Max Life Smart Secure Plus, and Tata AIA Sampoorna Raksha are frequently rated well for claim settlement and value — compare current ratings before buying. Compare on Policybazaar or Ditto Insurance (our recommendation for unbiased advice) before buying. Avoid mixing insurance with investment — read why endowment plans almost always lose compared to term + mutual fund. For a shortlist of the best options today, see our best ₹1 crore term insurance plans comparison. Also note: term premiums are rising in 2026 — buying now locks in your current age. There is now also zero GST on term insurance for individual policies, effective from September 2025, making it cheaper than ever to get covered. Once you've settled on the right sum assured, our term insurance riders guide covers which optional add-ons — waiver of premium, accidental death benefit, critical illness — are actually worth the extra premium. If your employer already offers group term life cover, don't assume it meets this number — see how group term life compares to an individual policy before treating your workplace benefit as sufficient. If you're self-employed or work gig platforms rather than drawing a fixed salary, sizing cover off variable income works differently — our insurance guide for gig workers and freelancers covers how to prove income without a salary slip and what sum assured insurers will actually approve. And this same exercise applies even when a spouse draws no salary at all — see our guide to life insurance for homemakers for how insurers size cover for a non-earning partner.