The Purpose of Life Insurance

Life insurance is not an investment. It is income replacement — a financial promise to your dependents that they will be protected if you can no longer earn.

The Human Life Value Method

The most accurate way to calculate cover:

1. Annual income needed by family after your death: ₹10 lakh/year. 2. Years they'll need it: Until your youngest child is financially independent (~20 years). 3. Present value of those future income needs (at 7% discount rate for 20 years): ~₹1.06 crore. 4. Add: Outstanding loans (home loan balance, car loan, personal loan). 5. Add: Major future expenses (children's education, marriage). 6. Subtract: Existing savings, investments, assets that are liquid.

Result = Your Required Cover

A Simpler Rule of Thumb

10–15× your current annual gross income.

Annual income ₹12 lakh → cover needed: ₹1.2 crore to ₹1.8 crore.

When to Buy More

  • When you take on a large home loan (match cover to outstanding loan).
  • When you have a second child.
  • When your income increases significantly.
  • When a parent becomes financially dependent on you.

    • What Type of Policy?

    For pure protection: always term insurance. It gives the highest cover at the lowest cost. A 30-year-old non-smoker can get ₹1 crore cover for as little as ₹8,000–₹10,000/year.

    > Altius Tip: Never count ULIP or endowment policies as insurance. Their effective cover is far below what a term plan provides for the same premium. Buy term for protection; invest separately for growth.