The Long Read

Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

Life cover of a term plan is a replacement of the income that you would have earned if you were around.

Underinsurance means having a term plan life cover that is not enough to meet your family’s expenses if you pass away unexpectedly, resulting in a total loss of income, especially if you are the sole breadwinner. 

For example: If you have a life cover of ₹ 1 cr but in your absence, your family would need a policy money of ₹ 5 cr, then you are underinsured. 


Use this simple formula to know if you are underinsured. 


The additional life cover you need = Current annual income x Number of years you plan to work from now - current cover


If this value is a positive number, then you are underinsured. 


If you have done any of the following things, chances are you are underinsured:


  • Not reviewed your life cover for ages to ensure it’s adequate for your changing needs

  • Relied only on employer term plan which is inadequate and has many limitations

  • Chosen the premium amount you want to pay and settled for the arbitrary life cover you got against it


Underinsurance can cause a lot of financial struggle for your family. If you are underinsured, you must take steps to rectify this issue. You can do one of the following:

  • Speak to your insurer/an insurance advisor to understand how to increase your life cover

  • Get an additional plan to increase your total life cover if your current plan doesn’t allow you to change your cover

Choosing your life cover correctly will help you ensure your family is adequately covered in your absence.

When it comes to calculating your life cover, what really matters is that:


Your life cover = Policy term x Current annual income


Pro-tip: Don’t rely on any life cover calculators or generic rules of thumb because they are either overly simplistic or are based on standard assumptions and not actual facts.