Term insurance is a pure protection life insurance plan offering financial security to your family for a specific period. It's designed to replace income and cover liabilities in your absence, ensuring your loved ones' financial stability.
No investment, just life cover. Maximizes financial security for your family.
Get substantial coverage, like ₹1 Crore, at affordable daily premiums.
Coverage for a chosen period, typically during your peak earning years.
Term insurance acts as a critical income replacement tool. It ensures your family can maintain their lifestyle, meet ongoing expenses, settle outstanding debts (like home or personal loans), and fund long-term goals such as children's education or marriage, even if you're no longer around. Its cost-effectiveness makes significant financial protection accessible to many.
Understanding these core elements helps you choose the right term insurance policy.
The fixed amount your nominee receives if you pass away during the policy term. Aim for 10-15 times your annual income, plus liabilities, minus assets.
The duration your coverage is active. Choose a term that covers your earning years and until dependents are financially independent.
The amount you pay (monthly, annually, etc.) to keep the policy active. It depends on sum assured, policy term, age, health, and lifestyle.
Sum Assured, Policy Term, and Premium are directly related. A higher sum assured or longer term generally means a higher premium. Balancing these is key to affordable and adequate coverage.
This diagram illustrates that the amount of coverage (Sum Assured) and the length of time you are covered (Policy Term) directly influence the cost (Premium) of your term insurance. Careful consideration of all three ensures you get the protection you need at a price you can afford.
India offers diverse term plans. Choose one that best fits your financial journey.
| Plan Type | Premium Structure | Coverage | Key Benefit | Ideal For |
|---|---|---|---|---|
| Level Term | Fixed and generally low | Fixed death benefit | Predictable cost, pure protection | Couples with young children, straightforward needs. |
| Increasing Term | Relatively constant but higher | Sum assured increases | Inflation protection, covers rising responsibilities | Those expecting higher future financial needs. |
| Decreasing Term | Low and fixed | Sum assured decreases | Cost-effective debt coverage (e.g., loans) | Individuals with large, diminishing loans like mortgages. |
| Return of Premium (TROP) | Higher than traditional | Death benefit + premium refund on survival | Protection with a "savings" aspect if you outlive the term | Those wanting a return if no claim is made. |
| Convertible Term | Fixed initially | Death benefit; option to convert to whole life/endowment | Flexibility for future permanent coverage needs | Young individuals wanting future permanent options. |
The table above summarizes common term insurance plan types available in India, helping you compare their features. Each plan caters to different financial situations and goals, from basic protection to plans that adapt to changing needs or offer a return of premium.
This chart shows a conceptual comparison of premium levels for different term plan types for a similar profile. Actual premiums vary greatly.
Term insurance is pure protection. Other types like Whole Life, Endowment, and ULIPs combine protection with savings or investment, leading to higher premiums.
It's vital to understand that some long-term "term plans" (e.g., till age 100) without cash value are functionally extended pure protection, not traditional whole life.
Enhance your basic term policy with optional add-ons for comprehensive protection against specific risks.
Extra payout if death is due to an accident. Good for frequent travelers or those in risky jobs.
Lump sum on diagnosis of major illnesses like cancer or heart attack, helping cover treatment costs.
Future premiums waived if you become critically ill or permanently disabled, keeping your policy active.
Provides regular income to your family for a set period after your demise, ensuring ongoing financial stability.
Allows advance payout of sum assured if diagnosed with a terminal illness with limited life expectancy.
Financial aid (lump sum/installments) if an accident leads to total permanent disability.
Riders customize your coverage, offering "living benefits" for events like critical illness or disability, which a basic term plan (paying only on death) wouldn't cover. This proactive planning can prevent financial collapse. Health-related rider premiums may also offer tax benefits under Section 80D.
The chart below shows an illustrative popularity of different riders. Choosing the right riders depends on your individual health, occupation, and financial situation.
The process involves meeting criteria and providing necessary information for risk assessment.
Follow these steps to secure your term insurance policy.
This flowchart outlines the typical steps from assessing your insurance needs to the final policy issuance. Accurate disclosure at every stage, especially regarding health and lifestyle, is vital for a valid policy.
Medical tests help insurers assess your health risk and determine fair premiums. Common tests include blood tests, urine tests, BMI, blood pressure, and sometimes ECG or TMT. These are usually paid for by the insurer. Honest disclosure is key to avoid claim rejection later. The "free look" period (usually 15-30 days after policy issuance) allows you to review terms and cancel if unsatisfied.
The claim process is the moment of truth. Understanding it helps ensure smooth settlement for your nominee.
CSR = (Claims Settled / Claims Received) x 100. A higher CSR (ideally >95%) indicates insurer reliability. Check IRDAI reports for official CSR figures.
This chart shows illustrative CSRs. Always verify current official data before choosing an insurer.
The nominee should follow these steps for claim settlement:
This flowchart details the process a nominee needs to follow. Prompt intimation and complete documentation are crucial. IRDAI mandates claim settlement within 30 days if all documents are in order, or up to 6 months if investigation is needed.
Full disclosure by the policyholder during application is vital. Misrepresentation can lead to claim rejection.
Term insurance not only protects but also offers tax benefits under the Income Tax Act, 1961.
Deduct up to ₹1.5 Lakh per year for premiums paid. Conditions apply (e.g., premium ≤ 10% of sum assured for policies post-April 2012).
Deduct premiums for health-related riders (e.g., Critical Illness). Limits: ₹25k for self/family, additional for parents (₹50k if senior citizens).
Death benefit received by nominee is entirely tax-free. Maturity benefits (like in TROP) also tax-free if conditions are met (e.g., premium caps).
This chart shows a conceptual breakdown of how different sections contribute to overall tax savings for an individual with a TROP plan and health riders. Actual savings depend on individual tax slabs and policy specifics.
Note: Tax laws are subject to change. The Finance Act, 2023, introduced new rules for high-premium non-linked policies issued after April 1, 2023, where maturity benefits might become taxable if aggregate annual premiums exceed ₹5 lakh.
Avoid common mistakes to ensure your term insurance truly protects your family.
While employer-provided insurance is a valuable perk, it often provides insufficient coverage and is tied to your employment. An individual term plan offers personalized, continuous protection that stays with you.