How Much Term Insurance Cover Do You Need? (2026-27)

Short answer: A salaried earner needs term insurance cover of about 21 times annual income at age 25, 18 times at 30, 16 times at 35 and 13 times at 40, by the income-replacement method. Add outstanding loans and subtract existing investments to get the final cover. The common 10 times income rule under-insures at every one of these ages, and 15 times falls short below about age 35.

Key fact (2026-27)	Value
Cover needed, income-replacement method	About 21× income at 25, 18× at 30, 16× at 35, 13× at 40 (FinMoon calculation)
GST on individual term insurance	Exempt from 22 September 2025; 18% before (GST Council)
Death claim settlement deadline	15 days from intimation; 45 days if investigated (IRDAI)
Interest on a late claim	Bank rate + 2% from the date of intimation (IRDAI)
Free-look period	30 days from receipt of the policy document (IRDAI)
Tax on the death benefit	Fully exempt under Section 10(10D) (Income-tax Act, 1961 numbering)

What is term insurance cover?

Term insurance is a pure life insurance policy that pays a fixed amount to the nominee if the insured person dies during the policy term. It pays nothing if the person survives the term. Term cover, or the sum assured, is that fixed amount. A term plan has no maturity value and no investment part, so the premium buys only life cover. A ULIP mixes insurance with investment and usually gives much less cover for the same money; see ULIP vs mutual fund + term insurance.

The purpose of term cover is to replace the income a family loses when an earner dies. The cover should be large enough for the family to pay off loans and meet living costs until the years the earner would have retired. Too little cover leaves the family short; more than needed only raises the premium.

What changed for term insurance in 2026-27?

Three changes since 2024 affect anyone buying term insurance in 2026-27:

1. No GST on premiums. The 56th GST Council meeting exempted all individual life insurance policies, including term plans, from GST from 22 September 2025. The rate before was 18% (GST Council FAQ). The same cover now costs less than before the change.
2. Fixed claim deadlines. IRDAI’s Master Circular on Protection of Policyholders’ Interests is dated 5 September 2024. It requires death claims to be settled within 15 days of intimation, or 45 days where investigation is needed (IRDAI). Late payment carries interest at the bank rate plus 2%.
3. Documented need analysis. The same circular requires insurers to document a need analysis before the sale and give the buyer a copy as part of the policy document.

How is term insurance cover calculated?

Term insurance cover is calculated in one of three ways; the income-replacement method is the most complete for an earner with dependants.

Method	How it works	Limitation
Multiple of income	Cover = a fixed multiple of yearly income, e.g. 10× or 15×	Ignores age, loans and savings
Expense method	Cover = family’s yearly expenses × years they need support, plus loans and goals	Needs a detailed budget
Income replacement (human life value)	Cover = present value of the income the family loses until retirement, plus loans, minus savings	Depends on assumptions about growth and returns

The income-replacement method is the approach that values the share of an earner’s future income that goes to the family, from today until retirement, in today’s money. It then adds outstanding loans and subtracts existing investments and existing individual cover. Human life value is another name for the income part of this calculation.

How much term cover do you need at each age and income?

An earner needs term cover of about 21 times yearly income at age 25, falling to about 13 times at age 40, before loans and savings. FinMoon calculated the cover by the income-replacement method. It assumes retirement at 60, income growth of 6% a year, a 7% after-tax return on the payout, and 70% of income going to the family.

Yearly income	Age 25	Age 30	Age 35	Age 40
₹10 lakh	₹2.10 crore	₹1.85 crore	₹1.60 crore	₹1.30 crore
₹15 lakh	₹3.15 crore	₹2.80 crore	₹2.40 crore	₹1.95 crore
₹20 lakh	₹4.20 crore	₹3.70 crore	₹3.15 crore	₹2.60 crore
₹30 lakh	₹6.30 crore	₹5.55 crore	₹4.75 crore	₹3.85 crore
Multiple of income	21.0×	18.4×	15.7×	12.8×

Cover amounts are rounded up to the next ₹5 lakh, because term plans are sold in round amounts. How to read the table: find your income and age, then add your outstanding loans and subtract your investments.

Two patterns stand out:

• The multiple depends on age, not income. With the same assumptions, every income needs the same multiple at a given age. The number of working years left drives the result.
• The 10× rule under-insures everyone below 45. At age 30, 10 times income covers just over half the family’s lost income. The 15× rule is close only from about age 35.

Worked examples: how term cover is calculated

Term cover is calculated in three steps. Take 70% of yearly income as the family’s share. Value it until age 60 at 6% income growth and a 7% return. Then add loans and subtract investments.

₹15 lakh income at age 30, with a home loan

A 30-year-old salaried earner has a spouse and one child, a ₹40 lakh home loan outstanding and ₹5 lakh of investments.

1. Family’s share of income = ₹15,00,000 × 70% = ₹10,50,000 a year, for 30 years until age 60
2. Present value of that income, growing 6% and discounted at 7% = ₹2,75,81,265
3. Add home loan ₹40,00,000 and subtract investments ₹5,00,000 = ₹3,10,81,265

Result: term cover of about ₹3.15 crore, rounded up. A ₹1.5 crore plan, the 10× rule, would cover less than half of this need.

₹30 lakh income at age 40, with employer group cover

A 40-year-old earns ₹30 lakh a year, has no loans, ₹60 lakh of investments, and ₹90 lakh of group life cover from the employer.

1. Family’s share of income = ₹30,00,000 × 70% = ₹21,00,000 a year, for 20 years until age 60
2. Present value of that income = ₹3,84,72,067
3. Subtract investments ₹60,00,000 = ₹3,24,72,067

Result: individual term cover of about ₹3.25 crore. Counting the ₹90 lakh group cover would cut the need to about ₹2.35 crore. But group cover usually ends with the job, so it is safer to treat it as a buffer.

How does term cover differ for each type of earner?

The right term cover depends on who relies on the income and what the earner owes.

Single with no dependants

A single person with no dependants and no loans needs little or no term cover. If parents rely on part of the income, cover that share only. A smaller policy bought young can be increased later, subject to the insurer’s rules and fresh underwriting.

Married with children

A family with children usually needs the full income-replacement cover from the table, plus loans. Add large future goals, such as a child’s higher education, if the family’s savings do not already cover them.

Home loan borrowers

Add the full outstanding loan to the cover, so the family can repay it without selling the house. As the loan reduces, the cover need falls, which is one reason to review cover every few years.

Single-income families

When one earner supports the household, that earner’s cover matters most. A non-earning spouse can usually be covered only through a joint policy or a rider linked to the earner’s policy, not a standalone plan. The cover amount is subject to the insurer’s underwriting limits.

Self-employed and business owners

Self-employed earners have no employer group cover, so individual term cover carries the whole need. Use average income over the last two to three years, and add business loans that the family would have to repay.

How long should term insurance cover last?

Term insurance should last until the family no longer depends on the earner’s income, usually the planned retirement age, such as 60. If a home loan or a child’s education continues beyond that age, extend the term to the later date.

A longer term raises the premium, because the insurer covers the higher-risk older years. A term that ends too early can leave the family without cover when it is still needed. Buying new cover after 50 usually costs more and depends on health.

How do you buy the right term insurance cover?

Buy term insurance by working out the cover first and then choosing the policy term and nominee.

1. Calculate cover. Use the table above for your age and income, then add loans and subtract investments.
2. Choose the policy term. Cover until retirement or until the last loan or goal ends, whichever is later.
3. Compare the insurer’s need analysis. IRDAI requires insurers to document a need analysis and give you a copy; check that it matches your own calculation.
4. Disclose health and habits fully. Smoking, existing illnesses and family history affect the premium; non-disclosure can lead to a claim being rejected.
5. Name the nominee and tell the family. Keep the policy details where the family can find them.
6. Review within the 30-day free-look period. The policy can be returned within 30 days of receiving the policy document.

Which tools calculate term insurance cover?

Term insurance cover can be calculated with an insurer’s need analysis, an online human life value calculator, or FinMoon AI.

• Insurer’s need analysis: IRDAI requires insurers to carry out and document a need analysis before the sale (IRDAI).
• FinMoon AI: an AI assistant that works out term cover from your income, age, loans and savings using the income-replacement method, and explains how each input changes the result.
• Human life value calculators: insurer and aggregator websites offer calculators; check which method and assumptions each one uses.

Common mistakes and edge cases

• Relying on employer group cover. It usually ends when you change jobs, often at the time you would need to buy cover at an older age.
• Using a flat 10× rule. At ages 25 to 40, the income-replacement method gives 13 to 21 times income.
• Forgetting loans. A ₹40 lakh home loan adds ₹40 lakh to the cover need.
• Hiding medical history. Non-disclosure is a common reason for claim disputes.
• Expecting a tax deduction under the new regime. The Section 80C deduction for premiums applies only under the old tax regime; see old vs new tax regime for 2026-27.
• Never reviewing cover. Review after marriage, a child, a home loan or a large salary rise.
• Choosing a term that ends too early. Cover that stops at 50 can leave the family exposed for the last working decade.

Sources and methodology

• Recommendations of the 56th GST Council meeting and FAQs, GST Council, September 2025, retrieved 25 October 2026
• Master Circular on Protection of Policyholders’ Interests, 2024, IRDAI, 5 September 2024 (claim deadlines, interest on delay, need analysis), retrieved 25 October 2026
• Master Circular on Life Insurance Products, IRDAI, 12 June 2024 (free-look period), retrieved 25 October 2026
• Deductions under the old and new tax regime, Income Tax Department (Section 80C)

Methodology: FinMoon AI computed every cover amount with a script that checks its own results. Assumptions:

• the earner spends 30% of income on themself, so 70% goes to the family
• income grows 6% a year until retirement at 60
• the family earns 7% a year after tax on the payout
• yearly amounts are counted from the start of each year
• cover amounts are rounded up to the next ₹5 lakh

The result is sensitive to these assumptions. Take a ₹15 lakh earner at age 30. The income replacement ranges from ₹2.43 crore at an 8% return to ₹3.15 crore at a 6% return. It ranges from ₹2.56 crore to ₹2.96 crore when the earner’s own share is 35% or 25%.

Disclaimer: This article explains a general method and illustrative calculations for 2026-27. It is not insurance or financial advice and does not recommend any product or insurer. Check the policy terms, the insurer’s need analysis and your own circumstances, or consult an IRDAI-licensed professional, before buying a policy.