Ritesh Sabharwal CFP®

W.M.W #19: The 3-minute test to see if your family is Underinsured!

Reading time: 5 minutes - October 25, 2025

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Hey Reader

Here's a conversation I had with my friend Rajeev last month:

Rajeev: "Bro, I have ₹50 lakh term insurance. My family is covered, right?"
​Me: "Let me ask you 3 questions. Will take 3 minutes."
​Rajeev: "Sure, shoot."

3 minutes later, Rajeev realized he was underinsured by 97 lakhs. And he's not alone - 7 out of 10 people I've run this test with discover they're significantly underinsured.

Let me show you the exact same 3-minute test. By the end, you'll know your real insurance gap - not some agent's guess, not a random online calculator, but your actual number.

The 3-Minute Insurance Gap Test

Grab a pen (or your notes app). Let's do this.
​Question 1: What's your family's monthly income requirement?

Not what you think they need. What they actually need to maintain their lifestyle. Think about:

• Rent/EMI
• School fees/education
• Groceries and household expenses
• Utilities (electricity, internet, etc.)
• Transportation
• Insurance premiums (health, car)
• Miscellaneous (entertainment, dining out)

Monthly income needed = ₹_____
​Rajeev's number: ₹35,000/month

Question 2: How many years does your family need this support?

Think about:

• Until your youngest child is financially independent (typically 25 years old)
• Or until your spouse reaches retirement age
• Whichever is longer

Years needed = _____
​Rajeev's number: 22 years (his daughter is 3 years old)

Question 3: What are your outstanding liabilities and future goals?

Liabilities (pay off immediately):

• Outstanding home loan: ₹_____
• Outstanding car/personal loans: ₹_____
• Any other debt: ₹_____

Future Goals:

• Children's school education (till 12th): ₹_____ per child
• Children's college education: ₹_____ per child
• Children's marriage: ₹_____ per child

Total liabilities = ₹_____Total future goals = ₹_____

Rajeev's numbers:

• Liabilities: ₹15 lakhs (home loan)
• School expenses: ₹1L/year per child for 12-14 years
• College: ₹25L per child
• Marriage: ₹10L per child

Now, Let's Calculate Your Real Insurance Need

Here's where most people get it wrong. They simply add everything up. But that's not how money works.

You need to account for:

1. Inflation - ₹35,000/month today ≠ ₹35,000/month in 10 years
2. Returns - The insurance amount will be invested and generate returns
3. Time value - Money needed 15 years later requires less today i.e., present value of 25L college education after 13 years will be 17L today with a 6% inflation

This is complex math. Which is why I built a tool to do this automatically.

Introducing: The Insurance Calculator

I've spent the last 6 months building this and others with my team. Here's what it does:

✅ Calculates income replacement with inflation adjustment
✅ Factors in investment returns (9% assumed)
✅ Computes school expenses year-by-year with inflation
✅ Projects college costs at the time your child needs them
✅ Accounts for marriage expenses with future value
✅ Deducts existing assets and insurance
✅ Gives you the exact coverage amount you need

And it takes literally 3 minutes to fill.

Use the calculator and find your insurance gap here - Life Insurance Calculator

Let Me Show You: Rajeev's Real Calculation

Using the calculator, here's what Rajeev found:

Total requirement: ₹1.52 crore
​Minus existing assets: ₹5 lakhs
​Final insurance needed: ₹1.47 crore
​His current cover? ₹50 lakhs.
​His insurance gap? ₹97 lakhs.

Why This Calculator is Different

Most online calculators use the lazy "10x annual income" formula. That's garbage.

Here's why this tool is better:

1. It accounts for time value of money: College fees needed 15 years from now don't require the full inflated amount today. The insurance corpus will grow at 9% annually.
2. It handles inflation properly: School fees don't jump 6%-10% once. They jump 6%-10% every year for 12-15 years. The calculator compounds this correctly for each child, each year.
3. It separates immediate vs future needs: Loans need to be paid off immediately. But marriage expenses 20 years away? That's calculated differently. The tool handles both separately and accurately.

Use the calculator and find your insurance gap here - Life Insurance Calculator

👉 Action Step for This Week

1. Run this 3-minute test - Write down your numbers. Don't estimate, calculate.
2. Compare with your current cover - What's your gap?
3. If you're underinsured by more than ₹50 lakhs - Get quotes from 3-4 insurers this week. Just quotes, no commitment.

I'm not saying you have to buy anything today. But you need to know your number.
Because the worst time to discover you're underinsured is when it's too late to fix it.

One Last Thing: Don't Overthink the "Perfect" Number

People get paralyzed trying to calculate the exact amount down to the last rupee. Here's my advice: It's better to be roughly right than precisely wrong.

If your calculation shows ₹2.3 crore, don't spend 3 months debating whether it should be ₹2.25 or ₹2.4 crore. Just get ₹2.5 crore and move on. The bigger risk isn't being ₹20 lakhs over-insured. It's being ₹1 crore under-insured.

Connect with me on LinkedIn, I write every day to help you make smarter money decisions👇

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