Term insurance is one of the simplest, most affordable, and most essential forms of life insurance available in India. Yet, many people—especially first-time earners—still find it confusing. This guide will help you understand how term insurance works, why it matters, and how to choose the right plan for your needs.
What Is Term Insurance?
Term insurance is a pure life insurance product that offers financial protection to your family in case of your untimely death.
If the policyholder passes away during the policy term, the insurer pays a lump sum amount (sum assured) to the nominee.
Key point: Term insurance has no maturity benefit—you pay for protection only, which is why premiums are low.
Why Is Term Insurance Important for Indians?
✔ 1. Rising Financial Responsibilities
Most Indian families depend heavily on a single or primary earner. Term insurance ensures your family’s lifestyle remains stable even in your absence.
✔ 2. Affordable Premiums
Term plans offer high coverage at extremely low premiums. For example, a healthy individual aged 25 can get ₹1 crore coverage for the cost of a monthly dinner.
✔ 3. Protection Against Liabilities
Loans such as home loans, education loans, and personal loans won’t burden your family if you’re no longer around.
✔ 4. Tax Benefits
Premiums qualify for deduction under Section 80C, and death benefits are tax-free under Section 10(10D).
How Does Term Insurance Work?
Term insurance is straightforward:
-
You choose your coverage amount (e.g., ₹50 lakh, ₹1 crore).
-
You select your policy term (e.g., 25–40 years).
-
Pay a fixed annual or monthly premium.
-
If you pass away during the term, your nominee receives the sum assured.
-
If you outlive the term, the policy simply ends (unless you have a return-of-premium plan).
Types of Term Insurance Plans in India
1. Level Term Insurance
The most common type—sum assured remains the same throughout the policy.
2. Increasing Term Insurance
Coverage increases every year to match rising inflation.
3. Decreasing Term Insurance
Coverage decreases over time—ideal for people with reducing loans like home loans.
4. Term Insurance with Return of Premium (TROP)
If you survive the policy term, all paid premiums are refunded. Premiums are higher than standard term plans.
5. Joint Term Insurance
One policy covers both husband and wife—useful for young couples.
6. Term Insurance with Riders
Additional add-ons such as:
How Much Term Insurance Cover Do You Need?
A general guideline is:
Coverage = 10 to 20 times your annual income
Example:
If you earn ₹10 lakh/year → Recommended coverage = ₹1 crore to ₹2 crore.
You should also consider:
-
Existing loans
-
Number of dependents
-
Children’s education costs
-
Lifestyle expenses
-
Future inflation
When Should Indians Buy Term Insurance?
The earlier, the better.
Buying at a younger age means:
-
Lower premiums
-
Higher chances of being medically eligible
-
Longer coverage options
For most Indians, the ideal age to buy is between 20–35 years.
Common Mistakes Indians Make When Buying Term Insurance
❌ 1. Choosing Low Coverage
Many people choose ₹20–30 lakh, which is far too low for long-term family needs.
❌ 2. Buying Only Through Agents Without Research
Always compare plans online before buying.
❌ 3. Not Disclosing Health Conditions
Hiding illnesses or smoking habits can lead to claim rejection.
❌ 4. Not Adding Riders
Critical illness or accidental riders provide essential extra protection.
❌ 5. Choosing Short Policy Terms
A policy should ideally cover you till age 60–65.
Factors to Consider Before Buying a Term Plan
✔ Claim Settlement Ratio (CSR)
Higher CSR = higher chances of successful claim.
✔ Solvency Ratio
Indicates the insurer’s financial strength (IRDAI requires 1.5 minimum).
✔ Premium Affordability
Choose a premium that fits your long-term budget.
✔ Policy Term
Prefer long-term coverage (30–40 years).
✔ Rider Options
Select riders that match your lifestyle or risks.
Popular Term Insurance Providers in India (General Market Examples)
(No ranking order—just common names known in the Indian market)
Conclusion
Term insurance is one of the smartest and most responsible financial decisions you can make for your family. It offers high coverage at low cost, protects your loved ones from future financial risks, and ensures peace of mind.
Whether you're a young professional, a new parent, or a primary breadwinner, term insurance should be a core part of your financial planning.