Question 1

How much term insurance cover do I need?

Accepted Answer

A common rule of thumb is 10-15 times your annual income. However, a more accurate method considers your income replacement need (present value of future earnings until retirement), existing liabilities (home loan, car loan, etc.), future goals (children's education, marriage), minus any existing life cover. This calculator uses a present-value model with 5% income growth and 6% discount rate.

Question 2

What is income replacement value in term insurance?

Accepted Answer

Income replacement value is the present value of all future income your family would lose if you were to pass away. It accounts for annual salary growth (typically 5%) and discounts future earnings to today's value (typically at 6%). For example, a 30-year-old earning Rs. 12 lakh/year with 30 years to retirement would need approximately Rs. 2.5-3 crore for income replacement alone.

Question 3

Should I include home loan in term insurance calculation?

Accepted Answer

Yes, you should include your outstanding home loan and all other liabilities (car loan, personal loan, credit card debt) in the term insurance calculation. This ensures your family can clear all debts without financial stress. Add these under 'Existing Liabilities' in the calculator.

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