1. The Standard Rule of Thumb: 10x to 15x Gross Income
The baseline financial benchmark is to hold a pure Term Insurance Sum Assured equal to at least 10 to 15 times your gross annual income. For example, if you earn ₹12 Lakhs/year, your minimum base term cover should be ₹1.2 to ₹1.8 Crores.
2. The Human Life Value (HLV) Calculation Formula
To estimate family financial protection requirements:
Total Estimated Life Cover = (Annual Family Living Expenses × Years until Retirement) + All Outstanding Loans (Home/Car/Personal) + Future Milestone Goals (Child Higher Education/Marriage) − Existing Financial Investments & Liquid Savings.
3. Factoring in 6%–7% Inflation
A college degree costing ₹25 Lakhs today will cost ₹50 Lakhs in 12 years at 6% inflation. Your term insurance payout must provide enough capital for your nominee to generate monthly family income via safe fixed instruments while keeping the principal intact.