How the term cover calculator works
You enter your age and intended retirement age, annual income, current monthly household expenses, outstanding loans, number of children, existing life cover and liquid savings. The engine converts that into four building blocks and then nets off what you already have.
The largest block is usually income replacement. Rather than multiplying income by an arbitrary number, the calculator computes the present value of your household's annual expenses for every year until retirement, discounted at a real rate of return. The real rate is derived from an assumed 8% investment return and 6% inflation, which works out to about 1.89% a year — the idea being that a lump sum invested conservatively should be able to fund a rising expense stream.
To that it adds outstanding loans in full, ₹20,00,000 per child for education and ₹15,00,000 per child for marriage. It then compares that needs-based total with a simple floor of ten times your annual income and takes the higher of the two, so that a household with modest current expenses is not left underinsured. Finally it subtracts your existing life cover and liquid savings once — only once — and rounds the remainder up to the next ₹25,00,000.
The formula with variable key
The present value of the expense stream uses a standard ordinary-annuity discount; everything else is addition and subtraction.
Formula
Cover = max( PV(annual expenses, real rate, years) + loans + education + marriage , 10 × income ) − existing cover − liquid savings
- Where:
- PV
- = annual expenses × [1 − (1 + real)^−years] ÷ real
- real
- = real rate = (1 + 8%) ÷ (1 + 6%) − 1 ≈ 1.89% a year
- years
- = retirement age − current age
- education
- = ₹20,00,000 per child (assumed)
- marriage
- = ₹15,00,000 per child (assumed)
- 10 × income
- = floor, so the answer is never below ten times annual income
The net figure is rounded up to the next multiple of ₹25,00,000, because insurers price in those steps and because rounding down would leave a gap.
Worked example in rupees
Take a 35-year-old planning to work until 60, earning ₹15,00,000 a year, with household expenses of ₹60,000 a month, ₹30,00,000 of outstanding loans, two children, ₹50,00,000 of existing life cover and ₹10,00,000 of liquid savings.
- Years to retirement = 25; real rate ≈ 1.89% a year
- Present value of ₹7,20,000 a year of expenses for 25 years = ₹1,42,45,511
- Plus loans ₹30,00,000 + education ₹40,00,000 + marriage ₹30,00,000 = ₹2,42,45,511 needs-based total
- Ten times income = ₹1,50,00,000, which is lower, so the needs-based total is used
- Less existing cover ₹50,00,000 and liquid savings ₹10,00,000 = ₹1,82,45,511 net need
- Rounded up: ₹2,00,00,000 indicative additional cover
Without the existing ₹50 lakh policy and ₹10 lakh of savings, the same household's indicative cover would be ₹2,50,00,000. That is the whole point of netting: cover you already hold reduces what you still need to buy, and this calculator subtracts it exactly once.
Comparison: how age changes the answer
| Age | Years to retirement | PV of expenses | Needs-based total | Indicative cover |
|---|---|---|---|---|
| 30 | 30 | ₹1,63,79,309 | ₹2,63,79,309 | ₹2,75,00,000 |
| 35 | 25 | ₹1,42,45,511 | ₹2,42,45,511 | ₹2,50,00,000 |
| 40 | 20 | ₹1,19,02,670 | ₹2,19,02,670 | ₹2,25,00,000 |
| 45 | 15 | ₹93,30,307 | ₹1,93,30,307 | ₹2,00,00,000 |
| 50 | 10 | ₹65,05,937 | ₹1,65,05,937 | ₹1,75,00,000 |
The need falls as you get older, because there are fewer working years left to replace — but the premium for a given cover rises sharply with age, so buying later is not cheaper overall. For a 28-year-old earning ₹12,00,000 with expenses of ₹25,000 a month and no loans or children, the needs-based total is only ₹71,57,722, so the ten-times-income floor of ₹1,20,00,000 takes over and the indicative cover is ₹1,25,00,000.
Getting the inputs right
- Enter household expenses, not your personal spending: the cover has to fund the family that remains, so use what the household actually spends each month.
- Existing cover means life insurance: employer group life and any personal term or endowment policy. Do not enter savings here — there is a separate field for that.
- Count loans in full: a home loan does not disappear when income does. If you have a separate loan-protection policy, count it as existing cover.
- Children's costs are assumptions: ₹20 lakh education and ₹15 lakh marriage per child are round planning figures, not researched estimates for your situation.
- Term insurance is pure risk cover: no maturity value, and that is the feature, not a flaw — it is why the premium buys so much more cover than a savings-linked policy.
- Disclose everything: smoking, medical history, income and existing policies. Non-disclosure is the main reason death claims are contested.
- Review after every major change: marriage, a child, a new loan, a big income change, or a policy maturing.
One structural choice is worth thinking about before you buy: how the money reaches your family. A single lump sum gives them flexibility but also the job of investing a very large amount at the worst possible moment. A staggered or monthly-income payout does the sequencing for them but locks the terms in advance. Neither is universally better; what matters is that whoever will receive the money knows the policy exists, knows where the documents are, and is named correctly as the nominee.
Tax treatment of term insurance
Premiums on a life insurance policy qualify for a deduction under Section 80C, within the overall ₹1,50,000 limit, and only under the old tax regime. Under the new regime, which is the default, no 80C deduction is available — so buy term cover for the protection, not for the tax saving.
The death benefit paid to your nominee is exempt under Section 10(10D), subject to the conditions in that section. Because term plans have no maturity or survival benefit, the practical question for most families is simply whether the sum assured is enough — which is what this page is for.
Frequently asked questions
How much term insurance cover do I need?
Enough to replace the income your family loses, clear your debts and fund commitments you have already made. This calculator computes the present value of household expenses to your retirement age, adds loans and children's costs, applies a floor of ten times annual income, and subtracts existing cover and liquid savings.
Why not simply take ten or fifteen times my income?
An income multiple is a rough shortcut that ignores your actual expenses, your loans and how many working years you have left. This calculator uses the needs-based figure and keeps ten times income only as a floor, so the answer is never lower than that shortcut.
What is the real rate of about 1.89%?
It is the assumed investment return of 8% adjusted for assumed inflation of 6%: (1.08 ÷ 1.06) − 1. Using a real rate lets the calculator discount a rising expense stream without projecting rupee amounts year by year. Both inputs are assumptions, not forecasts.
Should existing savings really reduce my cover?
Liquid savings your family could actually use do reduce the gap, so the calculator subtracts them once. Money earmarked for a specific goal, or illiquid assets like the house you live in, should not be entered here.
Until what age should the policy run?
Usually until you expect your income to stop, which for most people is their retirement age. Cover beyond that adds premium for a period when there is no income to replace, unless you have dependants who will still rely on you.
Is term insurance premium tax deductible?
Under the old regime, premiums count within the ₹1,50,000 Section 80C limit. The new regime does not allow the deduction. The death benefit is exempt under Section 10(10D), subject to that section's conditions.
What about riders like critical illness or accidental death?
Riders add specific cover for a specific event and are priced separately. Whether they suit you depends on your health, family history and what else you already hold. Read the rider wording — the definitions of the covered conditions matter more than the headline.
Does the calculator tell me the premium?
No. It only estimates the cover to plan for. Premiums depend on age, health, smoking status, tenure and the insurer's underwriting.
Is my employer's group life cover enough?
Rarely, and it ends when the job does. Count it as existing cover in the calculator, but plan your personal policy as though it were not there.
I have no dependants. Do I need term cover?
If nobody depends on your income and you have no loans that would pass to a co-borrower or guarantor, the need is small. Once there are dependants or a large loan, it changes quickly — and buying early usually costs less for the same cover.
Is this figure a recommendation to buy a policy?
No. It is an indicative planning figure. Two Plus Two Nine is an AMFI-registered Mutual Fund Distributor (ARN-171746), not an insurance intermediary or a SEBI-registered investment adviser, and does not recommend any insurance product.