No. This is a popular rule of thumb that many people consider when calculating their life cover before buying a term insurance plan.
But remember, the math is overly simplistic.
This formula gives you a life cover amount that will enable you to cover your family only for 10 years after your death.
Is that enough?
Well, there is no guarantee that your children or anyone who was financially dependent on you when you were around, will be independent within 10 years of your passing away.
For example, if your children are 7 and 10 years old at time of your passing, in 10 years they will be 17 and 20 years i.e. they will still not be financially independent and your family needs to be able to afford their care and education, among other responsibilities.
Also, there’s no way of knowing for sure that this policy amount will help your family meet their financial responsibilities like everyday expenses, loan payment, child’s education, medical expenses and so on.
So do not go by this thumb rule when calculating your life cover, because it won’t help you provide your family with adequate financial protection in your absence.