I keep getting this query: “I am 31 years of age, have a 2 year old kid and planning one more in 4 years time. My wife is currently working, but may drop out of the job market at least for a few years..I have a Rs. 1 crore policy which I took when I was 28. I am planning to take one more policy for Rs. 2 crores. Should I take it till my age of 55 or 65 years”.

I find it difficult to answer saying 55 or 65. The answer really depends on a few things. This man will be 35 by the time he has his second kid. If he takes a policy for 24 years (his age of 55) the second kid will be just 20 years of age and not exactly out of the nest. Surely he will have another 3-4 years of education left to be done. If he takes a policy for 34 years, he would have finished all his fee paying obligations and well and truly into retirement.

First of all I am happy that Gen Y has people who think so hard into making a decision, and planning so much in advance! He is currently earning well as is his wife (current income between them is about Rs. 45L gross) and can afford the additional premium that he will have to pay on the additional term insurance. Apart from this 1 crore policy he also has a Rs. 2 crore term plan – which is tagged to his Rs. 1.25 crore Mortgage.

So my suggestion is as follows:

I have no clue as to how you have arrived at your “Rs. 2 crores” fresh requirement of life insurance. Adjusted for inflation your children’s educational requirement is likely to be Rs. 5 crores and your wife’s retirement is likely to need Rs. 20 crores. Sure, if you are around this kind of money will happen, but if you are not around, there has to be a fall back option. Your current net-worth is about Rs. 73 lakhs, and I am ignoring the house in which you stay (ignoring the Mortgage also). So if you were to die tonight, your wife will get Rs. 1 crore and will of course get the house in which she is staying. This, is NOT SUFFICIENT. Surely, not sufficient.

I do not have enough data to run a financial requirement, but I guess you will need more insurance, let me not hazard a guess. Of course not knowing when we will die is a huge impediment in buying life insurance, but let us see what we can do.

By the time you are 55 years of age, I guess you would have finished your ‘earning’ life – or rather the ‘must earn’ part of your life. So if your term insurance gets over at 55, it should be fine. Term life is only to cover your ‘unearned income till you can work’. So 55 is fine. However, in case you develop some illness – or a health condition – like diabetes, it might become difficult to get term life insurance at a later age. So 31 is a good age to finish your shopping for term insurance.

My suggestion is for you to take say 10 crores of term insurance (just a random number, you should arrive at this number based on your financial investment numbers). Of this 3 crores can get over at age 50, 3 crores at 55 and the balance till your age of 65.

Financial planning and Insurance planning are process driven. So you should keep looking at his number closely and on a regular basis. If your companies esop does well and you do make your Rs. 4 crores pay off, to that extent your life insurance needs go down. If you sell off your house in Mumbai and go off to Goa to settle down you will generate some surplus on that too. However, these are all ifs and buts.

Life insurance is not an exact science. Some science, and some guts is what you need.

This was MY suggestion. Please tell me what would have been your suggestion – either as an insurance adviser or as a self educated investor / common man.



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  1. Wow the kind of numbers published here is mind boggling. And look at the dilemma, how much insurance should he take provided he and his wife are earning 45 Lacs per annum. Yes 45 Lacs per annum. People earning that kind of money having such petty dilemma is laughable…

  2. I had the same confusion when I want to take my term insurance 6 years back. How long should I have term insurance for 20 years or 30 years? I know the premium difference is negligible between 20 and 30 years. I was 32 when I was taking my term insurance for 20 years. Policy coverage was 9 times of my annual income during that time. But when I compare it to my current income policy coverage is not enough. But I am not planning to increase my coverage. Rather than I am increasing my savings. Trying to maintain the difference in the coverage by increase my assets. My colleague asked the question why it is 20 years not 30. My answer is in 20 years I have enough money in my savings so that I don’t need term insurance. I hope I will achieve my financial independence well before my target of 52.

  3. Well, it may appear that 45L income is a large sum to some. Sure, relatively speaking it can be. However, the non-trivial nature and impact of the problem is the same irrespective of whether a person earns 45L or 45K.

  4. Insurance is replacing money and not earning it. One should have term insurance based on expenses during working period. So 15 times annual expenses should suffice as that lumpsum will generate more in the long run. Do not try to replace income because 45L job may not be sustainable tomorrow – paying premium on 10crore policy may not be affordable if job loss happens – imagine paying for 30 yrs a very high premium and getting nothing in the end. Insure only what is required and not 10 times your requirement.

  5. 7000pm is not a high premium for a family with a 3.5L income per month

    even if he loses his job. Secondly any stupid rule like 15x of expenses is wrong. The whole thing can be worked out far more scientifically.

  6. Subra,

    I was thinking x times expenses etc – but changed my approach. I calculated the total earnings capacity assuming I work till 55 and looked at what would be the corpus… through term I am trying to cover that. Trouble is insurance companies think I am suicidal to ask for such a large cover 🙂 – so right now am at 25% of that cover

  7. One curious question. What if you already have lets say 15x expenses as your assets (inherited or otherwise). Do you still need insurance given that you already have savings of that amount?

  8. Want to understand if I have a term insurance of 1 cr , do I really need to go for any other life insurance ? Can we divert that fund to ELSS or Equities ?

  9. Get insured upto 65 with premium paying term till 55. No earning but still u r cover till 65.
    How much require, shud not depend on how much he earn , rather how much he spend monthly including all expense, his debt , EMIs etc.
    Thank you Subra sir for sharing.

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