Term insurance: start with the household, not the premium

Before comparing two insurance quotes, imagine the household six months after an income stops permanently. Rent still falls due. A loan still has a balance. Someone still needs to buy groceries.

That is the starting point for life cover: the financial responsibilities that would remain, and the resources available to meet them. A large round number in an advertisement cannot do that calculation for you.

Understand what you are buying

Term life insurance provides death cover for a specified period, subject to the policy's conditions. In a pure protection plan, there is normally no maturity payout if the insured survives the term. Products that return premiums have different benefits and pricing; read their wording rather than treating them as identical alternatives.

Life cover and hospital-expense cover solve different problems. Buying one does not automatically address the other. Nor should an investment projection be mistaken for a guaranteed insurance benefit.

Ask who depends on your contribution

Dependence may include a spouse, children or parents. It can also include unpaid work: replacing a caregiver's contribution may cost money even where there was no salary. Conversely, someone with no financial dependants and sufficient resources may have a different immediate need from a sole earner supporting a family.

Write the responsibilities down before asking for quotes. How long will support be needed? Which debts would need clearing? Which future expenses are essential? What income would continue from other sources?

A simple calculation—and its limits

Consider a hypothetical household needing ₹30,000 a month of support, a ₹20 lakh loan to clear and ₹10 lakh earmarked for a future goal. Assume ₹8 lakh of assets are genuinely available to meet those same needs.

Ten years of support at today's spending level: ₹30,000 × 12 × 10 = ₹36 lakh.
Add loan and goal: ₹36 lakh + ₹20 lakh + ₹10 lakh = ₹66 lakh.
Subtract available assets: ₹66 lakh − ₹8 lakh = ₹58 lakh.

₹58 lakh is a rough gap under these assumptions, not a recommended policy amount. The calculation ignores inflation, investment returns, taxes and the timing of payments. It also assumes ten years is the right support period. Changing any of those assumptions changes the answer.

Do not count a home as readily available spending money unless selling it is realistic. Do not count the same asset against two goals. If the loan is cleared separately, avoid including its EMI again in the household-support amount. Existing cover should be checked for its terms and duration before being deducted from the gap.

Compare the promise, then the price

Compare quotes using the same cover amount, policy duration, premium-payment period and payout arrangement. A lower displayed premium may reflect a different promise. Check exclusions, optional riders, what happens if payments stop and the documents your family would need to claim.

Keep the final proposal and policy wording. Answer the insurer's questions accurately, including health, habits, occupation and existing cover where requested. If someone fills the form for you, read the answers yourself. Ask the insurer to clarify an ambiguous question in writing rather than guessing what it wants to hear.

Make the policy usable by your family

A policy that nobody can locate is another task for a family at a difficult time. Tell the relevant person where the policy is kept, which insurer issued it and how to contact the insurer. Review nomination details and keep contact information current. Avoid leaving payment reminders entirely to memory.

Revisit the calculation when dependants, debts or household circumstances change. The aim is to cover an identified responsibility for an appropriate period, with a premium you can sustain.

Use TROUGH's loan calculator to understand repayment commitments and read more personal-finance articles. For choosing a policy and assessing your own cover needs, seek advice from a suitably authorised insurance professional and verify the product documents.

Sources and scope

IRDAI: Consumer information on insurance — term-cover basics and the importance of proposal information.
IRDAI: Consumer education booklet — checking policy terms and retaining documents. This is background consumer education, not a statement of current claim deadlines or tax rules.

The household example is an illustrative TROUGH calculation. No insurer or policy is being recommended; actual benefits and exclusions depend on the contract.