Most people don’t under-insure because they’re careless.
They do it because insurance is confusing, boring, and usually sold with half-truths.
One agent says “buy the maximum.”
Another says “this policy is enough.”
Online calculators throw big numbers without context.
The result?
Either you’re paying for covers you don’t need—or worse, you’re dangerously under-protected.
Insurance planning isn’t about following a one-size-fits-all formula. It’s about matching protection to your income, responsibilities, lifestyle, and future plans. Let’s break it down clearly—term insurance, health insurance, and accidental cover—without jargon or fear tactics.
Why “One Number Fits All” Insurance Advice Fails
A 26-year-old single professional earning ₹8 lakh and a 40-year-old parent earning the same salary should not have identical insurance.
Your cover depends on:
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Who depends on your income
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How long they’ll need that support
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Existing savings and assets
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Your health risks and job profile
This principle is echoed in consumer insurance guidance published by the Insurance Regulatory and Development Authority of India, which repeatedly warns against cookie-cutter insurance advice.
Rules of thumb are starting points—not final answers.
Term Insurance: Income Replacement, Not Investment
The Rule of Thumb (Simple Starting Point)
Most experts suggest term insurance coverage equal to 10–15 times your yearly salary.
So if you earn ₹10 lakh a year:
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Minimum cover: ₹1 crore
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Safer range: ₹1.5 crore
This works because it roughly replaces your income for your family if something happens to you—a logic used by most mainstream term cover calculators offered by large insurers and banks.
But this is just a baseline.
Needs-Based Analysis: The Smarter Way
A detailed calculation looks at real obligations, not just salary.
Ask yourself:
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How many years will my family need support?
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What major expenses lie ahead?
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What liabilities exist today?
A simple framework:
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Living expenses: Annual household costs × years of support needed
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Liabilities: Home loan, personal loans, education loans
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Future goals: Children’s education, marriage, spouse’s retirement
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Minus assets: Savings, investments, existing insurance
This approach mirrors financial-planning frameworks recommended by firms like PwC India in their personal risk-management and protection studies.
This method almost always gives a more accurate number than any fixed multiple.
Online Tools: Useful, Not Perfect
Online tools help estimate coverage quickly, but don’t blindly trust the final figure.
Use them to:
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Sanity-check your assumptions
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Compare scenarios (with/without loans)
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Adjust inflation and income growth
Treat them as calculators—not decision-makers. Even the Insurance Information Bureau of India notes that calculators must be combined with personal context.
Common Term Insurance Mistakes
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Buying too little to save on premium
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Mixing insurance with investment products
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Not increasing cover after marriage or kids
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Choosing short policy terms that end before retirement
These are among the most frequently cited consumer errors in insurance awareness reports released by IRDAI.
Health Insurance: Medical Costs Don’t Care About Your Salary
Health insurance isn’t linked to income—it’s linked to hospital bills.
Rule of Thumb
For urban India today:
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₹10–15 lakh family floater is the minimum for metro cities
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Add a super top-up of ₹20–30 lakh for serious illnesses
Medical inflation runs at 10–12% annually, a figure consistently highlighted in healthcare cost studies referenced by the National Health Authority.
A ₹5 lakh cover that felt “safe” five years ago is now borderline risky.
Factors to Consider Before Deciding Cover
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City of residence (metro vs non-metro)
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Family medical history
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Employer insurance limitations
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Network hospitals near your home
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Co-pay and room rent limits
Health insurance should protect your savings—not just pay part of the bill.
Pro Tip
Buy health insurance early, even if your employer already provides one.
Employer policies are temporary. Personal policies stay with you when jobs change—and premiums are far lower when you’re young and healthy. This portability advantage is repeatedly highlighted in consumer advisories by IRDAI.
Accidental Cover (Personal Accident Insurance): Cheap but Powerful
This is the most ignored yet cost-effective insurance.
Rule of Thumb
Accidental cover should be at least equal to your term insurance—often 10–15 times your annual income.
Why?
Accidents can:
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Cause permanent disability
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Stop income instantly
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Require long-term care
Term insurance pays only on death. Accidental cover protects income loss due to disability—an important distinction explained in risk-protection literature published by the International Labour Organization.
Mandatory Coverage? Not Legally—but Practically Yes
For anyone who:
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Commutes daily
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Travels frequently
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Works long hours
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Is the sole earning member
Personal accident insurance isn’t optional—it’s essential.
Factors to Consider
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Permanent total vs partial disability coverage
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Monthly income replacement benefit
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Coverage during work and non-work hours
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Claim settlement reputation
Premiums are surprisingly low. Skipping this cover is usually a cost-cutting mistake—not smart planning.
Putting It All Together: A Simple Action Plan
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Start with rules of thumb for quick direction
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Do a needs-based calculation for term insurance
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Upgrade health cover beyond employer plans
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Add accidental cover equal to income replacement
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Review every 3–5 years or after major life changes
Insurance planning isn’t about perfection. It’s about not leaving blind spots.
Final Thought: Insurance Is Boring—Until You Need It
Good insurance planning doesn’t make you rich.
It makes sure one bad event doesn’t make you poor.
If your current cover was chosen casually, it’s time to review it properly—calmly, logically, and without sales pressure.
