Do you have the right amount of insurance cover? Here’s how you can find out.

  • Life Insurance

Numbers never lie, do they? In the case of life insurance coverage in India, they present quite a sad picture.

Analysis of government and industry data shows that at least 100 crore Indians are not insured in any manner. That’s over 75% of India’s population!1

And this is despite the fact that term plans are available for as low as Rs. 1,0001 a month.

Clearly, the protection gap in India is wide. Even among those with insurance coverage, it is often not adequate enough to financially support the dependent family members in case of the policyholder’s demise.

Given this scenario, there are a couple of things you can do to ensure that your family is financially well-secured.

1. Find out the right amount of life cover for you and your family.

2. Go ahead and get it.

Sounds simple, right? The second part, that is.

The real work lies in identifying the right amount of cover for your needs. And here's how you can do that.

How much life insurance do you need?

The exact amount of life cover you need is subjective, of course. But broadly speaking, there are many expert-recommended benchmarks that you can use to calculate the ideal amount of coverage you will need.

One popular rule of thumb suggests that your life insurance coverage should be approximately around 6 to 10 times your annual income - before taxes and other deductions.

Others suggest that you should keep it to at least 15 times your annual income.

And then, there’s the DIME Method too. It's an acronym for –





This means you’ll have to account for all the debt in your name, the income you earn now (multiplied by a reasonable number, as we saw above), any mortgage balance you may have, and the education of your children.

Then again, the DIME method is simply a benchmark. It does not account for any specific life goals your family may have. And it ignores any other assets you may already have in your name. So, all things said and done, your life cover should be enough to allow your family to live a comfortable life, even if something untoward happens to the sole/primary earning member.

What should you consider before deciding on the ideal life insurance cover?

Do you already have a life insurance cover that you are planning to enhance? Or perhaps, you’re just applying for your first life insurance plan? (In that case, congratulations!)

Whatever the case may be, here are the key factors that you need to take into account before you decide on the amount of life cover.

What’s your age?

Experts generally suggest that the earlier you buy life insurance, the better. So, broadly speaking, your 20s would be the perfect time to put your life insurance cover in place. That’s because your liabilities would be lower today, but they’ll most likely increase tomorrow.

On the other hand, if you’re older, but you’ve paid off most of your liabilities, you may need a lower cover. So, your age and your corresponding financial position play a major role in determining the right amount of life cover.

The age at the time of purchase is important because different life stages come with different needs and requirements. Roughly speaking, here’s an estimate that you can use as a benchmark.

Age bracket

Minimum recommended life cover

Below 35 years

Outstanding liabilities + 20 times your current annual income

36 to 45 years

Outstanding liabilities + 15 times your current annual income

46 years and above

Outstanding liabilities + 10 times your current annual income

How many dependents do you have?

Are your parents dependent on you? Or your spouse, and perhaps children too? You’ll need to factor in their financial needs before you identify the cover you need. Also, you may not have any dependents today, but later in life, you may be married, or have children, or perhaps, your parents may start to depend on you financially. Consider these scenarios and purchase a life cover accordingly.

Have you factored in inflation?

Inflation - that’s what most people overlook. And that often proves to be a costly mistake. Here’s an example to show you how leaving inflation out of the equation can leave you dangerously underinsured.

  • Hypothetically, say you spend Rs 20,000 per month today.
  • And suppose that the inflation rate is 6%.
  • In this case, you will require Rs 26,765 to cater to the same expenses 5 years from now.

See how inflation can drive the prices up? By this same scale, if you think that your dependents will need Rs. 1 crore to survive today, what happens 20 years down the line?

Well, at an inflation rate of 6% per annum, they will need Rs. Rs. 3,20,71,355!

Are you looking for pure life insurance, or do you want to also save/invest simultaneously?

There are different types of life insurance plans, and they offer varying kinds of coverage. Term plans, for instance, typically offer a higher sum assured, but no returns. Endowment policies, on the other hand, generally ensure a lower sum assured, but offer some returns at the time of maturity. And ULIPs give you modest life insurance coverage coupled with market-linked returns.

Given this wide range of options available, you need to decide which kind of life insurance cover is the best for you and your family.

What are your liabilities?

If you have any loans that need to be paid off, or any major financial commitments like your child’s - or children’s - higher education, you need to make sure that your life cover is enough to meet these needs. Essentially, your life insurance plan should be adequate enough to cover all the major life events that are yet to take place, plus all the liabilities you have in your name.

The bottom line

All in all, the formula to roughly estimate the adequate amount of life cover for yourself and your family would be this.

Life cover:

= X times your family’s annual expenses

+ The value of all the liabilities in your name

- The value of all the assets in your name

There are many online tools too, that can help you calculate this amount easily. So, go ahead and make the right decision for your future - and your family’s!

To get a better idea of the right amount of life cover, try our HUMAN LIFE VALUE CALCULATOR

This free online tool takes into account everything that matters - your current and retirement age, your current income, existing life cover if any, and the people you want to protect.

Check it out here


Want to ensure your family’s milestones are well-protected financially, come what may? The ABSLI Guaranteed Milestone Plan helps you do just that.

With fully guaranteed benefits, guaranteed additions and an option to cover your spouse, this plan gives you added benefits along with an adequate life cover to protect your loved ones.

Know More

ABSLI Guaranteed Milestone Plan (UIN: 109N106V09) is a non-participating traditional insurance plan. ADV/7/21-22/708.

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Term Products

ABSLI Life Shield Plan

A term insurance plan that offers you the flexibility of plan options suitable for your family's non- negotiable goals and ensure they need not compromise on their lifestyle. UIN: 109N109V06

  • Choice of 8 plan options
  • Cover your spouse under the same policy
  • Longer Life cover till age 85

ABSLI DigiShield Plan

PROTECTING multiple life needs with one plan is now possible. UIN 109N108V08

  • 10 Plan Options to suit your varied protection needs
  • Flexible death benefit pay-out options
  • Life insurance cover for 1 year or till age 100 yrs

ABSLI Saral Jeevan Bima

A simple plan to protect your family’s financial future (UIN 109N128V01)

  • Simple & affordable plan
  • Flexible premium paying terms
  • Enhance insurance cover with rider

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