Term Insurance Calculator (How Much Life Cover?)
Term Insurance Calculator (How Much Life Cover?)
How much life cover your family would need: the money to replace what they spend for as many years as they would depend on you, plus debts and goals, less what you already have. No premiums, no products.
Life cover needed
Family expenses $6,00,000 a year for 20 years, rising 5% a year, the payout earning 7%; loans $30,00,000, goals $20,00,000, savings $10,00,000, existing cover $25,00,000
Cover needed: expenses, debts and goals, less what you have
- X
- the family’s yearly expenses at today’s prices, spent from the start of each year
- N
- the years of support
- f
- inflation on those expenses, as a decimal
- r
- the return the invested payout earns, as a decimal. When r = f the present value is simply X × N.
Worked example
Family expenses $6,00,000 a year for 20 years, rising 5% a year, the payout earning 7%; loans $30,00,000, goals $20,00,000, savings $10,00,000, existing cover $25,00,000
q = 1.05 ÷ 1.07 = 0.981308; q20 = 0.6857
Present value of expenses = 6,00,000 × (1 − 0.6857) ÷ (1 − 0.981308) = $1,00,90,232
Add loans and goals: 1,00,90,232 + 30,00,000 + 20,00,000 = $1,50,90,232
Less savings and existing cover: 1,50,90,232 − 10,00,000 − 25,00,000 = $1,15,90,232
For comparison, 10–15 × an income of 12,00,000 is $1,20,00,000 to $1,80,00,000
Present value of 6,00,000 a year of family expenses, rising 5% a year
| Years of support | Return 6% | Return 7% | Return 8% |
|---|---|---|---|
| 10 years | $57,51,586 | $55,19,677 | $53,02,943 |
| 15 years | $84,29,284 | $79,12,674 | $74,44,119 |
| 20 years | $1,09,83,035 | $1,00,90,232 | $93,03,978 |
| 25 years | $1,34,18,578 | $1,20,71,747 | $1,09,19,481 |
| 30 years | $1,57,41,385 | $1,38,74,868 | $1,23,22,733 |
Working out cover from what your family would need
Life cover is there to replace the money your family would lose. The classic way to size it is the human life value idea, set out by S.S. Huebner in the 1920s: insure the present value of the income your family depends on. This page uses the needs-based version of that idea, which starts from what your dependants would actually spend. It asks how much money, invested today, could pay their yearly expenses — rising with inflation — for as many years as they would need support, and then adds the loans they would have to repay and the goals you want funded, and takes off the savings and cover you already have.
In the example, $6,00,000 a year for 20 years, rising 5% a year, adds up to $1,98,39,572 of spending, but because the money not yet spent keeps earning 7%, a lump sum of $1,00,90,232 covers it. The chart shows that lump sum being drawn down: each year’s withdrawal rises with inflation, and the balance reaches zero at the end of the last year. The first year’s spending is taken at the start of the year, so the family is never waiting for the money. With the loans and the education goal added, and existing savings and cover taken off, the additional cover needed is $1,15,90,232.
A common shortcut is cover of 10 to 15 times your annual income — a rule of thumb insurers publish as a quick benchmark, not a regulatory figure. It is shown beside the result for comparison. It ignores how many years your family depends on you, your debts and what you have already saved, which is why the two can differ widely.
Three assumptions drive the answer. The return has to be one the family could earn safely while living on the money, so be cautious. Inflation compounds over twenty years, so a point higher adds a lot. And goals entered in today’s money are added as they are, which assumes the money set aside for them grows as fast as their cost. This page does not estimate premiums or suggest any policy; a regulated adviser or the insurer can help with those. For the goal amounts themselves, the SIP goal calculator shows what a goal will cost later, and the emergency fund calculator sizes the cash your family would need first. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
How much term insurance do I need?
Enough to replace your family’s expenses for the years they would depend on you, plus debts and goals, less savings and existing cover. In the example that is $1,15,90,232.
Is 10 to 15 times my income enough?
It is an insurer’s rule of thumb and a useful cross-check, not a calculation. It ignores your debts, your savings and how long your family would need support, so it can be well above or below what you need.
Why does the return on the payout matter?
Because the family spends the money over many years, and what is not yet spent keeps earning. A higher return means a smaller lump sum is enough; if the return only matches inflation, you need the full years × expenses.
Does this calculator estimate premiums?
No. Premiums depend on age, health, habits, term and insurer. The page sizes the cover only.
Related calculators
References
- Huebner SS. The Economics of Life Insurance: Human Life Values, Their Financial Organization, Management, and Liquidation. New York: D. Appleton, 1927. The origin of the human life value approach: insure the present value of the income a family would lose.
- ICICI Prudential Life Insurance. How much term insurance do I need? (accessed 22 September 2026): the income replacement method “suggests 10–15 times annual income as a quick benchmark”. An insurer’s rule of thumb, cited as such; not a regulatory figure.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. Present and future values, annuities and growing annuities; the level-payment loan formula.
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.