A worked example
Sample figures, not a suggestion: yearly income ₹6,00,000, 20 years to retirement, 25% spent on the earner, loans ₹5,00,000, savings ₹2,00,000, cover in place ₹10,00,000. Extra cover to consider: ₹83,00,000.
| Item | Amount |
|---|---|
| Family's share of income a year | ₹4,50,000 |
| Income the family would lose, today's value | ₹90,00,000 |
| Plus loans to clear | ₹5,00,000 |
| Less savings and investments | − ₹2,00,000 |
| Less life cover in place | − ₹10,00,000 |
| Extra life cover to consider | ₹83,00,000 |
The assumptions in that example
- 25% of income is spent on the earner, so the family needs the other 75% (assumed).
- The family needs that amount for 20 years, at the start of each year.
- No rise in income is counted.
- No return on money set aside is counted.
- Loans are cleared in full from the cover; savings and cover in place are taken off.
Estimate only, not advice.
How it is worked out
The family's share of income is needed at the start of each year until retirement. It rises by the income growth you type and is discounted by the return you type. Leave those two blank and neither is counted. Method: human life value, a common planning method. IRDAI gives no formula for how much cover a person needs.
Common questions
What is human life value?
A common way to estimate life cover: the income a family would lose, valued in today's money, plus loans to clear, less what is already there.
Does IRDAI recommend a formula?
No formula from IRDAI was found. Treat the result as a planning estimate.
Which plan should the client buy?
This tool does not say. It names no plan and no insurer.
Sources
This is a planning method with no official source: no official formula was found. Every figure in the result is one you typed.
