Life insurance: which type, and how much?
Most insurance confusion in India comes from one mixed-up idea: treating insurance as an investment. So start with the clean definition: life insurance is income replacement. If people depend on your earnings, it replaces those earnings if you're gone. That's the whole job. Judge every policy against that one sentence and the fog lifts.
The types, in plain words
Term insurance is the pure form: a large cover for a small premium, nothing back if you outlive it — which is the point, like car insurance you're glad you never used. Endowment and money-back plans mix insurance with savings: premiums are heavy, the cover is small, and the "returns" are usually modest. ULIPs mix insurance with market investing, with their own charge structures. None of these is illegal or evil — but look at what the same money buys as protection:
Approximate, illustrative figures for understanding — actual premiums and costs vary by age, health, insurer and city.
That ~25× difference is why the standard, boring wisdom exists: keep protection and investment separate — pure term for the cover, and invest the difference in instruments built for investing. If you already hold mixed policies, don't act on a blog — reviewing what to continue, pause or restructure is precisely a sit-down with a qualified advisor.
How much cover? Two methods that agree
The thumb rule: 10–15× your annual income, plus any outstanding loans. Earning ₹8 lakh with a ₹30 lakh home loan → roughly ₹1.1–1.5 crore. The DIME method builds the same answer from parts — Debt + Income replacement + Mortgage + Education:
Both methods land in the same zone, which is the real lesson: the number isn't mysterious. It's your loans plus roughly a decade of your income plus your children's big-ticket goals. For most earning parents that's ₹1–2 crore — and at 30–35, pure term cover of that size typically costs less than a monthly restaurant bill.
Who needs it — and who doesn't
The test is dependence, not age. A bachelor with no dependents can wait (health insurance can't — see the health cover article). The day someone depends on your income — spouse, child, parents you support — term cover stops being optional. And revisit the number at life events: marriage, each child, a big loan, a big raise. Cover set in 2015 is almost certainly wrong for 2026 — the thali article explains why standing still moves you backwards.
General financial education, not advice or solicitation of any product. All figures approximate and illustrative. Insurance is the subject matter of solicitation — please evaluate policies with a qualified, licensed advisor.
Related reading: Health insurance: how much cover is enough? · The right money mix for your age