Let’s start with a number.
Because everyone wants a number.
“How much insurance should I get?”
“10 lakh enough?”
“1 crore the standard now?”
“Someone told me just do 10x your salary…”
This is where things already go wrong.
Insurance isn’t a number you copy. It’s a gap you calculate.
And most people? They never calculate anything. They guess. Or worse, they let someone else guess for them.
The Most Common Lie You’ll Hear
“Just get coverage equal to 10–15 times your annual income.”
Sounds neat. Clean. Easy to remember.
Also… lazy advice.
Let’s say you earn 1,000,000 PKR per year.
So you get 10 million coverage.
Cool.
Now answer this honestly:
- Do you have debts?
- Kids’ education ahead?
- Aging parents depending on you?
- Rent? Loans? Lifestyle costs?
Because 10 million might be:
- Too much for someone
- Or dangerously low for someone else
Same income. Completely different realities.
But people love shortcuts. And the insurance industry doesn’t mind—it keeps things simple enough to sell.
Let Me Put It This Way
Insurance is not about you.
It’s about the people who would struggle financially if you disappeared tomorrow.
That’s the uncomfortable truth nobody likes to sit with.
You’re not calculating your worth.
You’re calculating the financial hole your absence creates.
A Real Scenario (And This Is Where It Gets Real)
Let’s imagine this.
You’re 35.
- Married
- Two kids
- Monthly expenses: 120,000 PKR
- Outstanding loan: 3 million
- Kids’ education ahead: easily 5–10 million
Now pause.
If something happens to you today, what happens next?
Your family doesn’t suddenly stop needing money.
Life continues. Bills continue. School continues.
So your insurance should replace:
- Your income
- Your financial responsibilities
- Your future commitments
Not just some random multiplier.
The “Income Replacement” Myth
People say: “Just cover your income.”
Okay… but for how long?
5 years? 10 years? 25 years?
Because replacing one year of income is meaningless.
What matters is:
How many years your family needs support.
If your kids are young, that number could be 15–20 years.
If you’re close to retirement, maybe less.
This is where real calculation begins—and where most people stop thinking.
The Formula Nobody Explains Properly
Let’s break it down without making it boring.
You need to calculate three things:
1. Your Financial Responsibilities
- Loans
- Debts
- Mortgages
This is immediate pressure.
2. Your Family’s Future Expenses
- Monthly living costs
- Education
- Marriage (in our culture, yes—it’s real)
This is ongoing pressure.
3. What You Already Have
- Savings
- Investments
- Assets
This reduces the pressure.
Now here’s the actual logic:
Insurance Needed = (Responsibilities + Future Expenses) – Existing Assets
Simple on paper.
Messy in real life.
Why Most People Underestimate Their Needs
Because they think in today’s money.
Not future reality.
Let me explain.
Your current monthly expense: 100,000 PKR
In 10–15 years? That could easily double.
Education costs? Already rising like crazy.
Healthcare? Don’t even get me started.
So when people calculate insurance based on today’s numbers, they’re basically underinsuring themselves without realizing it.
The Emotional Blind Spot
Here’s something numbers don’t capture.
When someone passes away, the family doesn’t just lose income.
They lose:
- Stability
- Decision-making
- Financial confidence
So what happens?
They play safe.
They avoid risks.
They don’t invest aggressively.
Which means the insurance amount needs to compensate for that conservatism.
But nobody includes this in calculations.
The “I’ll Increase It Later” Trap
A classic mistake.
“I’ll take a small policy now and increase it later.”
Sounds logical.
But life doesn’t always cooperate.
- Health issues may come
- Premiums increase with age
- You may not qualify for higher coverage later
So what felt like a flexible decision becomes a permanent limitation.
On the Flip Side: Over-Insuring Yourself
Yes, this happens too.
Some people take massive coverage they don’t really need.
Why?
Because:
- An agent pushed it
- It “felt safer”
- Bigger number = better feeling
But here’s the problem:
You end up paying high premiums unnecessarily.
That money could have been:
- Invested
- Used to build assets
- Strengthened your financial position
Insurance is protection—not a status symbol.
A More Honest Way to Think About It
Forget formulas for a second.
Ask yourself this:
“If I’m gone tomorrow, how much money would my family need to live without stress?”
Not survive.
Not struggle.
Live with dignity.
That number is your starting point.
What People in Real Life Usually Need
Let’s get practical.
For many middle-class families:
- Coverage between 15–25 times annual income makes more sense than 10x
- Plus outstanding debts
- Plus future major expenses
But again—this is a direction, not a rule.
Because your life is not average.
The Hidden Factor: Inflation Is Quietly Destroying Your Plan
This is the part people ignore the most.
Inflation doesn’t announce itself loudly.
It just slowly makes everything expensive.
So the insurance amount that feels “big” today?
Might feel average—or even small—in 10–15 years.
That’s why static thinking fails.
You need dynamic thinking.
A Story That Stays With Me
A guy once told me:
“I thought 5 million was enough. It sounded like a lot.”
A few years later, after reviewing his finances properly, he realized:
It wouldn’t even cover 5–6 years of expenses for his family.
That’s when it hit him.
“I wasn’t protecting my family. I was just comforting myself.”
That line says everything.
So… How Do You Get It Right?
Not perfectly. But better than most.
1. Start with expenses, not income
Income is what you earn. Expenses are what your family lives on.
2. Add all liabilities
Clear debts first. Always.
3. Think in years, not lump sums
How long does your family need support?
4. Adjust for inflation
Future costs will not stay the same.
5. Subtract what you already have
Savings matter.
6. Revisit every few years
Life changes. So should your coverage.
The Part Nobody Wants to Admit
Calculating insurance properly forces you to think about uncomfortable things:
- Your absence
- Your family’s dependence
- Financial vulnerability
So people avoid it.
They pick a number quickly and move on.
But avoiding the discomfort doesn’t reduce the risk.
It just hides it.
(And It’s Straightforward)
Most people don’t have too little insurance because they can’t afford more.
They have too little because they never truly understood what they were trying to protect.
Insurance isn’t about guessing a number.
It’s about understanding your life deeply enough to protect it properly.
And if you get that wrong?
The consequences won’t show today.
They’ll show when it actually matters.
And by then, you don’t get a second chance to fix it.