Two things make Indians get this wrong in opposite directions. Many are badly underinsured, holding a small endowment policy that feels like insurance but barely covers a year of expenses. A few are oversold, paying for far more cover, or far costlier cover, than their family would ever need. Both mistakes come from starting with the product instead of the number.

Start with human life value, not a product

The cleanest way to size cover is the human life value method: roughly, the money your family would need to replace what you provide. Add up the income your dependents rely on and the years they will rely on it, add your outstanding loans, add large future goals like a child's education or a home loan payoff, then subtract the assets and cover you already have. What remains is the gap your life insurance should fill.

A common shorthand is 10 to 15 times your annual income, and it is a fine starting point. But the full calculation is better, because it accounts for your actual loans and goals rather than a generic multiple. Someone with a large home loan and young children needs far more than the rule suggests; someone debt-free with grown, independent children may need much less.

Term insurance: the honest instrument

For that gap, term insurance is the right tool, and it is not close. A pure term plan pays a large sum to your family if you die during the policy term, and nothing if you outlive it, which is exactly what insurance is meant to do. Because it carries no investment component, the cover is enormous for the premium. A healthy 35-year-old can often insure ₹1 crore for less than many people spend on a phone each month. That is the whole point: maximum protection for minimum cost.

Why endowment and ULIPs mislead

The reason so many are underinsured is that they were sold endowment plans or ULIPs, which bundle insurance with investment. The bundle sounds efficient and is the opposite. The cover is small relative to the fat premium, and the investment portion typically returns far less than a simple term-plan-plus-mutual-fund combination would over the same years.

Insurance and investment are two different jobs, and mixing them does neither well. Buy a term plan for protection, invest the difference separately in line with your goals, and you almost always end up with both more cover and more money than a bundled policy delivers. The bundle mainly serves the person selling it.

It just got cheaper

There is a timely tailwind. Since September 2025, GST on individual life insurance dropped to zero from 18%, which makes term cover roughly a sixth cheaper than it was. If you have been putting off buying enough protection, the cost of fixing it has fallen at exactly the right moment. That alone is a good reason to revisit your number now rather than at the next renewal.

The payout side is tax-friendly too. The sum your family receives on a death claim is exempt from tax, so the cover you buy reaches them in full. It is another reason to keep insurance and investment separate: term does the protecting, cleanly and tax-free, while your investments do the growing.

Getting it right

A few rules that survive contact with real life. Buy enough cover that your family could clear every debt and maintain their standard of living without you, then add for major goals. Prefer term over any bundled product for the protection itself. Pair it with adequate health cover so a medical event does not quietly undo the plan. Review the number whenever your income, loans, or family change. And do not over-buy: cover is meant to replace what you provide, not to leave anyone enriched.

One honest caveat: not everyone needs life insurance. If no one depends on your income, no children, no dependent parents, no shared loans, you may need little or none, and the money is better invested. Life cover is for the people who rely on you, not a box everyone must tick.

Where this leaves you

Life insurance is not an investment and was never meant to be. It is the promise that if the worst happens, the people who depend on you are not left short. Size that promise to your real obligations, buy it as cheaply and cleanly as term allows, and you have done the most important part of protecting your family.

Frequently asked questions

How much life insurance do I actually need?
Enough to replace the income your family depends on for the years they need it, clear your debts, and fund major goals, minus your existing assets and cover. A common shorthand is 10 to 15 times annual income, but the full calculation is more accurate.
Is term insurance better than endowment?
For protection, yes. Term gives a very large cover for a small premium with no investment mix-up. Endowment and ULIPs bundle low cover with modest returns. Buying term and investing the difference separately usually beats both.
What is the human life value method?
It estimates the financial value your family would lose without you: future income, minus what is already provided for by assets and existing cover. The result is the amount of life cover you should hold.
Did life insurance get cheaper in 2025?
Yes. From 22 September 2025, GST on individual life insurance premiums was removed, down from 18%, so premiums are roughly a sixth lower than before for new and renewing individual policies.
Can I have too much life insurance?
Yes. Cover is meant to replace what you provide, not to accumulate. Paying for far more than your family would need, or paying extra for investment-linked policies, is money better directed to your actual goals. This article is for information only and is not investment or insurance advice. Product features and tax treatment can change. Please speak to a qualified adviser before acting. Sources: Ministry of Finance notification on GST exemption for individual life insurance (September 2025) and standard human-life-value methodology. Verified July 2026.

If you are not sure whether your cover matches your family's actual needs, SELEQT can work out your number and separate the protection from the products being sold alongside it.