Worried about Corona virus spreading in India? Buy Health Insurance and get coverage now. View Plans
Take informed decisions with IIFL Insurance:

How Much Maximum Term Insurance Cover can you take?

When it comes to securing the future of our loved ones, most of us want to go the extra mile. As the primary earner of the family, you too may have been clouded by the worry that if something happens to you who will take care of your family and its financial well-being. While uncertainties cannot be averted, being prepared for one is the best way to fight them. And when you are thinking about the financial stability of your family, insurance is probably the best option.

The concept of insurance is quite simple and most people seem to understand it, however, when it comes to buying term insurance, there are many questions that come to mind such as, What is the maximum term insurance that I can take? Should I take 5 crore term insurance or should I go for a 10 crore term insurance plan? Can I take as big an insurance cover as I want? If you too have had these questions hovering over you, read on to find all the answers.

First things first, the maximum term insurance that one can take depends on a number of factors rather than just the policyholder’s wish. You should also know that there is no such thing as “No Limit” when it comes to the sum assured in a term insurance policy. There are specific guidelines laid out by the IRDAI that base the maximum term insurance one can opt for, on his/ her average annual income.

The table given below shows the eligibility criteria for purchasing a term insurance cover. It should be noted here that the cover can be different when the lives of females and children are covered. It should also be remembered that the sum assured depends on a number of other factors.


Cover as a multiple of the average of a person’s 3-year annual income

Up to 30 years of age

22 times

Up to 40 years of age

17 times

Up to 50 years of age

12 times

Over 51 years of age

10 times


This is a standard thumb rule. However, your term insurance requirement can vary vastly from the above rule, based on your family’s wealth, dependents, outstanding liabilities, etc.

Let us understand this with the help of a few examples with the help of the above thumb rule:

  1. Sohail Siddiqui is a 27-year-old healthy non-smoker male. His average income in the past 3 years is INR 5.4 lakhs. So, till the time he turns 31, the maximum term insurance he can opt for is a cover that is 22 times the average of his 3-year income, which comes to around INR 1,18,80,000 (one crore eighteen lakhs eighty thousand).
  2. Vishal Malhotra is a 38 years old male businessman. His 3-year average income is around INR 42 lakhs. The maximum term insurance that he can opt for is 17 times the average income which is approximately INR 7,14,00,000 (seven crores fourteen lakhs).
  3. Let us again take the example of Vishal Malhotra and let us suppose he has recently turned 41 years. Now, at this age, he can buy a cover that is only 12 times his 3-year average annual income. So, if his average income is still 42 lakhs, he would be able to opt for a maximum term insurance cover of INR  5,04,00,000 (five crores four lakhs).
    With an almost similar salary, he would not be able to opt for an INR 5 crore term insurance, as then he would be eligible to get coverage only 10 times his 3-year average income, and that would be INR 4,20,00,000 (four crores twenty lakhs). 

You also need to know that just like there are certain restrictions on the maximum term insurance one can opt for, there are rules that apply to riders as well. So, when you plan to add a rider to your policy, make sure you know the maximum amount you can opt for.

To Summarise

The onset of Covid-19, made many see the need of being adequately covered. And, though more and more people are taking their attention to the importance of term insurance, it is imperative to understand how a term insurance plan works and what is the maximum term insurance that one can opt for. There are many insurance companies that repeatedly offer a 5 crore term insurance or even a 10 crore term insurance plan, while such offers may look lucrative, you need to know if it is really an option for you.

Only when you are aware of the basics, would you be able to make a well-informed decision and buy a term plan that will look after your family, even when you are no longer around?

Buy Insurance - 18002101330