Term insurance is designed primarily to provide life cover for a specified period. The appropriate sum assured should be linked to the financial loss dependants would face if the insured dies, rather than selected only through a simple salary multiple.

A useful assessment considers liabilities, family living costs, children's goals, existing assets and the number of years dependants may need support.

Start with Liabilities

Include home loans, education loans and other obligations that the family would need to repay or service.

Estimate Family Income Replacement

Consider essential annual household expenses and how long support may be required. Inflation should be considered in long-term needs.

Add Major Future Goals

Education, marriage or other clearly defined goals may require additional protection where they would otherwise depend on the insured's future income.

Subtract Suitable Existing Assets/Cover

Existing life cover and liquid assets earmarked for family security can reduce the uncovered gap. Do not casually count assets needed for other essential purposes.

Policy Term Matters

Cover should broadly correspond to the period of financial dependence and liabilities, subject to product terms and underwriting.

Disclosure Is Critical

Health, occupation, habits and other proposal-form information should be answered accurately. Material non-disclosure can create claim problems.

Fynmate Insight

Do not buy term cover only because a round number sounds large. Build a simple needs calculation and review it after major events such as marriage, children, a home loan or a substantial income change.

Note: Insurance is the subject matter of solicitation. This article is for general educational and informational purposes only. Insurance coverage, exclusions, waiting periods, premiums, underwriting and claim admissibility depend on the policy wording, insurer and applicable regulations. Read the policy document and Customer Information Sheet carefully before purchase.

Primary Reference Direction

  • IRDAI life-insurance policyholder education and the insurer's policy wording/CIS

Frequently Asked Questions

Is 10x annual income enough?

A salary multiple is only a rough shortcut; actual needs can be higher or lower.

Should both spouses have cover?

Assess the financial impact of each person's death, including income and unpaid household/care responsibilities.

Does term insurance provide maturity value?

Pure term products are primarily protection products; specific benefits depend on the policy selected.