Need more than ₹1 crore cover? How to recalculate your life insurance needs

I am 42 and already have a basic term plan of ₹1 crore. Considering high inflation and its future impact, I am thinking of buying an additional term plan in the new financial year. What would you recommend? Also, should I opt for a regular term plan or a return-of-premium option? And why?

Advice by Satishwar B., MD and CEO, Bandhan Life

This is a very relevant concern. Inflation may not feel dramatic in the short term, but over 15–20 years, it can significantly erode the real value of your financial protection. At 42, you are likely in your peak earning years, but also at a stage where key responsibilities—such as children’s education, loan repayments, and long-term family needs—are still unfolding. Strengthening your life cover now can help ensure your family’s financial stability in the years ahead.

Additional life cover

As a broad guideline, your total life insurance cover should ideally be 10–15 times your annual income. However, your actual requirement should also factor in:

Outstanding liabilities such as home or personal loans
Future lifestyle expenses and the rising cost of living
Long-term goals like higher education or financial independence for your spouse
The impact of inflation on household expenses over time

If your current ₹1 crore cover does not adequately address these needs, purchasing an additional policy can help bridge the protection gap.

Consider a Term Plan...

One effective way to address inflation risk is by opting for a term plan that allows you to increase your sum assured during the policy term. Unlike a standard term plan where the cover remains fixed, this feature provides flexibility to adjust your life cover as your financial responsibilities evolve.

This means:

> Your insurance protection keeps pace with rising expenses and future financial needs without requiring multiple policies
> Your family benefits from a higher payout in later years, when financial responsibilities are typically greater

Increasing term plans are particularly useful for individuals in their 30s and 40s who expect income growth, higher liabilities, and long-term commitments. Bandhan Life is also working on such solutions that align coverage with inflation and evolving life goals.

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Regular Term Plan vs Return of Premium (TROP)

When choosing between a regular term plan and a return-of-premium plan, your decision should depend on affordability and your primary objective—protection or savings.

Regular Term Plan

A regular term plan remains the most cost-efficient way to enhance your life cover.

Premiums are relatively affordable, which is especially important when buying insurance in your 40s
You can opt for a higher sum assured, ensuring meaningful financial protection for your family
Lower premium outgo allows you to continue investing in other wealth-creating instruments

Some plans also offer flexibility through exit options at later stages. For example, features like ‘Special Exit Value’ allow policyholders to recover premiums at a certain age, such as 55.

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Return of Premium Plan

A return-of-premium plan refunds the total premiums paid if you survive the policy term.

This may appeal to individuals seeking a tangible maturity benefit
However, premiums are significantly higher compared to regular term plans, especially when purchased later in life
This higher cost may limit your ability to secure adequate coverage

If your priority is maximising protection in a cost-efficient manner, a regular term plan—or one with an increasing sum assured—generally makes more sense.

Additional approach

Alongside enhancing your term cover, you may also consider a ULIP with a high sum assured if you want to combine protection with long-term wealth creation.

• ULIPs offer life cover along with market-linked growth, helping investments potentially outpace inflation
• Some plans provide a death benefit multiple of up to 50 times the annual premium
• They help build a long-term corpus for retirement or major life goals
• You can switch between equity, debt, or balanced funds depending on market conditions and risk appetite
• After the five-year lock-in period, partial withdrawals offer liquidity during emergencies

This approach ensures that while you strengthen your protection, you also create a disciplined pathway for wealth accumulation.

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What you should note

Enhancing your life insurance at this stage will help safeguard your family’s future against rising costs and uncertainties. A regular term plan or one with an increasing sum assured can strengthen your financial safety net affordably, while a high sum assured ULIP can add a growth dimension.

The right strategy is one that allows your protection to grow alongside your responsibilities — ensuring that the life you are building today continues to support your loved ones tomorrow, regardless of how inflation or time evolves.