Term insurance calculator

What this page is, and what it is not

This calculator estimates a cover amount, which is the rupee figure a term policy pays if the insured life does not survive the policy term. The number is an input to planning, not the price of the plan. It is not a premium quote, and no insurer or policy is named on the page.

Method 1: income replacement

Income replacement is one of the two common ways to size a cover amount. The idea is simple: if the insured life stopped earning tomorrow, the plan should stand in for that income for the years that remain between today and the retirement age. The rupees arrive in future years, so the page discounts them at a real rate to get a present value today.

In formula terms, the page takes the annual income and multiplies it by the present-value factor of an ordinary annuity over the years to retirement, at the real rate. Current savings and existing cover are subtracted. Formally, cover from income replacement equals annual income x (1 minus (1 + r) raised to minus n) divided by r, minus current savings, minus existing cover. The real rate on the input is an assumption, not a forecast, and is the gap between the nominal return on savings and inflation.

Method 2: needs based

Needs based looks at what the household owes and what it will need. It adds three lines: loans outstanding today (home loan balance, car loan, personal loan or education loan), the present value of the dependants' household expense for the support window (that is, the years dependants need a regular income after the earning life ends), and future goals at today's value (a child's education, a wedding, or any other lump outgoing).

The dependants' expense is a monthly figure converted to an annual rupee amount, then run through the same real-rate annuity factor as method 1, over the years of support. Loans and goals are taken as today's rupee amounts, without a separate discount, because loans amortise on their own schedule and goals are already in today's rupees by convention. The sum is reduced by current savings and by existing cover to give the needs-based gap.

Worked example you can check

Take a 30-year-old earning ₹12,00,000 a year, with ₹10,00,000 in current savings, ₹50,00,000 of existing cover, a home loan balance of ₹50,00,000, dependants' household expense of ₹50,000 a month for 25 years, future goals of ₹30,00,000, and a 2 per cent real rate.

Income replacement comes out higher than needs based on these inputs. Both are net of the existing cover, so each is the gap this reader would need to close if they chose to top up their current cover.

Shorthand multiples of income are not a rule

Articles on this topic often cite a multiple of annual income as a guide. Ten times and fifteen times are the two most-quoted figures. On the worked example above, those shorthand numbers come to ₹1,20,00,000 and ₹1,80,00,000 respectively. The income-replacement method returns about ₹2.09 crore (precisely ₹2,08,75,747) and the needs-based method returns about ₹1.37 crore (precisely ₹1,37,14,074).

The multiples are a mental short-cut; they do not react to the age of the earning life, the gap between a current age and a retirement age, the loans the household carries, the number of years dependants need support or the real rate on savings. The two methods on this page do react to those inputs, which is why their answers can sit on either side of a shorthand multiple. Treat a multiple as a sanity check, not a prescription.

India rules that matter for a term plan

GST on an individual term life policy is nil since 22 September 2025, after the 56th GST Council meeting and the Department of Financial Services FAQ that followed. Before that date, individual term premiums carried 18 per cent GST. Group term policies carried by an employer continue at 18 per cent. This affects what a household actually pays each year, not the cover amount the policy carries; the calculator on this page sizes cover, and does not model premium.

A proposal form typically asks for financial underwriting documents, nominee details and a medical declaration. The final cover a household can obtain depends on income proof, the insurer's underwriting and the policyholder's health profile. None of this is on the page. Treat the arithmetic as a planning input, not as an entitlement to the figure the calculator produces.

The cover need usually falls over time

Most households' cover need is highest at the start of the working years and falls as they age. Working years left shrink by one each year. Loans amortise down; a home loan ten years into a twenty-year schedule carries less balance than one at origination. Dependants need fewer years of support as they grow up, and savings outside the policy usually grow.

The secondary chart on this page runs that logic forward, holding today's inputs steady but letting the clock move. It traces both the income-replacement gap and the needs-based gap year by year, and shows both reaching zero as the retirement age approaches. In a real household the chart is bumpier, because incomes rise and loans refinance, but the direction of travel is almost always down.

What this calculator leaves out

• Premium. The page never prints a rupee figure for a premium, by design. Premium depends on the insurer's underwriting.
• Riders. Accidental death, critical illness or waiver-of-premium riders change what a plan pays and what it costs, and are not modelled here.
• Tax on the payout. A term policy's death benefit is treated under the applicable provisions of the Income-tax Act 2025 (corresponding to the earlier section 10(10D)); the specific treatment for a given policy depends on the premium-to-cover ratio and the insurance-policy rules. A qualified chartered accountant can place that for your case.
• Inflation after the earning life ends. Dependants' expense is run through a real rate, so an explicit inflation path is not needed; a reader who wants a nominal view can use the inflation calculator on the gross expense.
• Investment-linked and whole-life products. This page is scoped to a term plan's cover amount; other life products are outside its arithmetic.

Frequently asked questions

Courses that teach the subject behind the term insurance calculator