Term Insurance: The Most Important Policy You Probably Do Not Have
Why term insurance is critical, how much cover you need, and how Paisanomy helps you identify gaps in your protection layer.
Why Term Insurance?
Term insurance is pure life cover. If something happens to you, your family receives a lump sum. No investment component, no maturity benefit — just protection.
And that is exactly why it is the most cost-effective form of life insurance.
Who Needs It?
If anyone depends on your income — spouse, children, parents — you need term insurance. Period.
How Much Cover?
The standard recommendation is 10-15 times your annual income. But a more precise calculation considers:
- Outstanding loans — home loan, car loan, education loan
- Family expenses — monthly needs multiplied by years until independence
- Children's education — estimated future costs
- Existing savings — subtract what you have already built
For a 30-year-old earning INR 12L per year, the recommended cover is typically INR 1.5-2 Crore.
Common Mistakes
- Buying endowment plans instead — they provide inadequate cover at high premiums
- Underinsuring — a INR 50L cover when you need INR 1.5 Cr is dangerous
- Delaying — premiums increase with age, and health can change
- Not disclosing health conditions — claims can be rejected
What About Health Insurance?
Term insurance covers life risk. Health insurance covers medical expenses. You need both.
For health insurance:
- Minimum INR 10L cover (INR 20-25L recommended for metros)
- Get a family floater for spouse and children
- Separate policy for parents (they will be excluded from your floater above age 60)
Paisanomy Protection Score
Your Paisanomy dashboard calculates a Protection Score based on your insurance coverage relative to your income, loans, and dependents. It flags gaps instantly.
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