How Long? How Much? Understanding Term Insurance the Right Way 

 

“Term Insurance”—a buzzword that’s echoing across the financial market these days. Everyone’s talking about it. But what’s the most common figure people throw around? ₹1 crore.

It sounds like a huge safety net. For many, that amount feels like a solid guarantee of security for their family if the unthinkable happens. But take a moment and think—what will ₹1 crore be worth after 20 or 30 years? With inflation, that amount may shrink in real value to the equivalent of ₹50 lakhs or even less.

So, let’s clear the confusion:
Who needs term insurance? How much is actually enough? How long should the coverage last?

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What Is Term Insurance—And Who Is It Really For?

Term insurance isn’t something you buy for yourself—it’s for your family. You may not be around to use the money, but your loved ones will depend on it.

Most people make the mistake of choosing a term length based on how long they might live—up to 80 years, for instance. But that’s not the right approach.

🧠 The ideal term: Choose coverage that lasts until your youngest child turns 30. That’s roughly the age by which they’ll be financially independent. After your children are settled, the need for term insurance practically disappears. The key is to make sure your family’s lifestyle remains stable in your absence—especially during their formative years.

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The Shrinking Value of Money: Why ₹1 Crore Today Won’t Be Enough Tomorrow

Let’s take a quick look back.

• 10 years ago, ₹100 could buy you 4 kg of rice.

• Today, the same ₹100 fetches only 2 kg, or less.

• In another 10 years, even 1 kg might seem like a luxury.

Now apply the same logic to life insurance. If you think ₹1 crore is a big deal now, remember: it’s going to lose its value year after year. In fact, with inflation, the real value of ₹1 crore after 30 years may be just ₹12.5 lakhs.

This is why deciding the right insurance amount is absolutely essential. It’s not about the number—it’s about the impact that amount can create when your family needs it the most.

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A Real-Life Scenario: When ₹1 Crore Fell Short

Let’s look at a common case.

A software engineer earning ₹1.6 lakhs per month lived happily with his mother, wife, and two kids. His children were studying in an international school, with an annual fee of ₹3 lakhs for both. He had a house loan. Thankfully, he also had term insurance worth ₹1 crore.

Tragically, he passed away in an accident.

His family received the ₹1 crore policy amount and deposited it into a bank fixed deposit. After tax deductions, the monthly interest was around ₹45,000. Thankfully, the home loan had a separate insurance cover, so that burden was off their shoulders.

But even then—

• Annual school fee = ₹3 lakhs

• Annual income from FD = ₹5.4 lakhs

Where’s the buffer?
What about food, medical costs, utilities, inflation, and future emergencies?

The answer is clear: ₹1 crore was simply not enough.

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So, How Much Insurance Do You Actually Need?

The goal of term insurance is to replace your income for your family. The payout should be large enough that, when invested safely (like in an FD or bonds), it can generate an income similar to your current earnings.

A simple rule of thumb:

If you’re earning ₹1 lakh per month, you should have a term insurance cover of at least ₹2 crore to ₹4 crore.

Don’t pick an insurance amount based on what sounds big. Pick it based on your actual income and your family’s ongoing expenses.

And don’t forget the future: school fees go up, living costs rise, medical expenses increase, and retirement for your spouse might still be decades away.

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Income Growth vs Insurance Cover: A Comparison

Let’s say you’re earning ₹10 lakhs per year today.

Assume a modest 7% annual salary hike.

• In 10 years, your income becomes ₹20 lakhs

• In 20 years, ₹40 lakhs

• In 30 years, ₹80 lakhs

Now, if you’ve taken a term plan of just ₹1 crore, it’s nearly equal to your annual income after 30 years. That won’t sustain your family for more than a year.

📌 That’s why financial experts now recommend term insurance of ₹3 crore to ₹5 crore for individuals with a current annual income of ₹10 lakhs or more.

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Final Thought: The Best Gift You Can Leave Behind

Term insurance is not just a policy—it’s a plan for your family’s future. It’s the last act of care and responsibility you can provide.

Choose the right amount, for the right duration, and based on realistic expectations about inflation and income needs.

Because when you’re gone, your family shouldn’t just survive.
They should live with dignity.

✨ About Me

Hi! I’m Manikanta Reddy, a passionate finance enthusiast with a strong understanding of money management, personal finance, and smart investment strategies. I believe financial literacy is the foundation of a secure and stress-free life — and I’m here to share practical insights, real-life examples, and simplified advice to help you make better financial decisions.

Whether it’s choosing between paying off a loan or investing, building emergency funds, or planning for retirement — I love breaking down complex topics into easy, actionable tips that anyone can follow.

Let’s learn, grow, and build wealth — the smart way. 💰