Is Your Term Insurance Coverage of Rs. 1 Crore Enough?

A term insurance plan is a type of life insurance that offers financial coverage to the policyholder's family for a specified period. Having a term insurance plan is one of the most efficient and effective ways to meet your ever-changing needs and protect your family from life's uncertainties.

How much insurance coverage do you need to help your loved ones meet future financial goals and maintain their standard of living? Is ₹1 crore term insurance coverage enough for you? Let's learn how to choose the right insurance policy for your needs and purchase the best term insurance plan at an excellent affordable price.

Term Insurance Coverage
Term insurance plan

Is ₹1 Crore Term Insurance Coverage Enough for You?

Despite the inflation, ₹1 crore is still a big amount that can ensure safe urban living. So, when it comes to term insurance, ₹1 crore coverage satisfies many policy buyers. 

However, one should not buy a life insurance policy without determining the financial status. There is no one-size-fits-all when deciding the term insurance coverage amount. All analysis starts with one question: does the 1 crore term insurance cover you adequately? Will this cover amount be sufficient for your family's needs without you?

Another necessary question is, if you are comfortable paying the premium for a 1 crore term plan. The answer to this one is straightforward and can calculate term plan premium using the premium calculator. 

So, what are the factors that you should consider? Let us learn more.

The 1 Crore Term Insurance Coverage Is Not Standard

It is no longer necessary to track this number. One person may find it adequate, while another may not. You can estimate the amount of coverage based on your life objectives and future liabilities. Therefore, the 'figure of benchmark' won't work when your family's future liabilities go beyond one crore.

How to Choose the Right Term Insurance Cover?

Several people recommend purchasing term insurance equal to 15 - 20X your annual salary, but there are better formulas than this one. It can be up to 50 lakhs, one crore, or two crores. Individuals may require different coverage amounts depending on their income, dependents, and needs.

Use the following formula to calculate term insurance premiums:

Term Insurance Cover Amount = [family's lifetime expenses (annual expenses given inflation till retirement age) + Future expenses objectives + Debts or Loan] – Savings

When calculating the amount of term insurance coverage, it is essential to consider the family's future financial needs. For example, if Ram's current expenses are ₹60,000 per month in 2019, inflation of 8 per cent will increase it to ₹80,000 per month in five years.

The monthly household expenses (after ten years) would then increase to a lakh or more. When purchasing a term policy, you should factor in this increase in standard living expenses. 

You should consider outstanding loans, the number of years your dependents need an income or salary every month, and other related costs you have strategically planned in future. You will then receive your term insurance coverage amount after subtracting your reserves.


Raj has two children and a house loan. Moreover, he has a 1 Crore Term Insurance policy. Let us find out if the term plan coverage of 1 crore is sufficient for him or not.

Raj's Age: 30 years

Retirement Age: 60 years

Current Family Expenses: ₹3 lakhs

Family expenses for the next 30 years (with 8% inflation): 3 Cr.

House Loan: ₹50 lakhs

Higher Education and Child's Future: ₹50 lakhs

Total: ₹4 Crore (3 Crore + 50 lakhs + 50 lakhs)

Personal Savings + PF + Mutual Reserves or Funds: ₹50 lakhs

Life Insurance Cover Required: ₹4 Crore – ₹50 lakhs = ₹3.50 crores

He needs a ₹3.5 crore term plan. He will fall ₹2.5 crores short of his current plan.

Check Your Term Insurance at 5-year Intervals

Your liabilities can increase due to a home loan, marriage, childbirth, etc. It all adds up to your requirements. Every 4 to 5 years, you should review your term insurance coverage as your financial responsibilities grow.

Bottom Line

If you are wondering how much term insurance is enough for you and planning to purchase one, you need not worry. Instead of choosing the ₹1 Crore figure, use the formula above to find a suitable term insurance plan for your family.

While it may seem that you will need big insurance coverage for your future, you should keep in mind that the premiums for large insurance coverage can cost a lot in premiums. So, always calculate the term plan premium before purchasing one.

The Scientific World

The Scientific World is a Scientific and Technical Information Network that provides readers with informative & educational blogs and articles. Site Admin: Mahtab Alam Quddusi - Blogger, writer and digital publisher.

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