Choosing the right LIC Sum Assured is more art than science — but the math is straightforward. Pick too low and your family is under-protected; too high and you overpay for decades. Here are three proven methods.
Method 1 — The Income Multiple Rule
Quickest thumb rule. Buy Sum Assured of 15 to 20 times your current annual income.
- Annual income ₹5 lakh → SA ₹75 lakh to ₹1 crore
- Annual income ₹10 lakh → SA ₹1.5 to ₹2 crore
- Annual income ₹20 lakh → SA ₹3 to ₹4 crore
This is the method used by most online term-plan portals because it accounts for inflation and family expenses.
Method 2 — Expense-Based (Human Life Value)
Sum Assured should be enough to replace your income for the years your family needs it.
SA = (Annual income × Years to retirement) + Liabilities − Existing savings
Example: Age 30, income ₹8 lakh/year, retirement at 60 (30 years), home loan ₹30 lakh, savings ₹5 lakh
- Income replacement: ₹8 lakh × 30 = ₹2.4 Cr
- Add liabilities: + ₹30 lakh
- Subtract savings: − ₹5 lakh
- SA needed: ≈ ₹2.65 Cr
Round up to ₹3 crore and pick the nearest LIC term plan or use the LIC Saral Jeevan Bima 860 quote on our calculator.
Method 3 — Need-Based (Goal-Replacement)
Identify specific big expenses the family will face in your absence — and add them up.
| Goal | Indicative Amount |
|---|---|
| Children's education (school + college) | ₹25 lakh per child |
| Spouse's lifelong monthly income | ₹30,000/month × 30 years = ~₹1.1 Cr |
| Outstanding home loan | ₹30–50 lakh |
| Family emergency fund (5 years expenses) | ₹15–25 lakh |
| Medical / parental support | ₹10–15 lakh |
For a young couple with two kids, a home loan, and dependent parents, this method gives roughly ₹2 to ₹3 crore of cover — consistent with the income multiple method.
Adjusting for Inflation
Today's ₹1 crore will be worth only ~₹50 lakh in 15 years (6% inflation). Either:
- Add a 30–40% buffer to today's calculated amount, OR
- Buy an LIC plan that offers increasing cover (e.g., Tech-Term 954 with the increasing cover option)
Common Mistakes to Avoid
- ❌ Picking SA based on premium you can "afford" — reverse-engineer from need
- ❌ Forgetting to update SA after life events (marriage, child, home loan)
- ❌ Not accounting for inflation
- ❌ Relying solely on the insurance inside endowment plans (₹10 lakh is rarely enough)