Term Life Insurance Basics in India
By Sanjeev Kumar • Updated: 15 Aug 2025
This guide walks you through everything you need to know about term life insurance in India — from understanding its basics to selecting the best plan, avoiding common pitfalls, and making informed decisions backed by IRDAI guidelines.
What is Term Life Insurance?
Term life insurance is a pure risk cover — meaning it pays your nominee a lump sum (sum assured) if you pass away during the policy term. If you survive the term, no benefits are paid unless you opt for a Return of Premium (ROP) plan.
Unlike investment-linked products such as ULIPs or endowment policies, term insurance is designed purely to provide financial protection for your dependents, making it the most affordable way to secure high coverage.
Why Buy Term Life Insurance?
- Ensures your family can maintain their lifestyle in your absence.
- Covers outstanding debts like home loans or car loans.
- Provides high coverage at a low cost compared to other plans.
- Offers tax benefits under Sections 80C and 10(10D) of the Income Tax Act.
- Peace of mind for long-term financial planning.
How Much Cover Do You Need?
Experts recommend a cover of 10–15 times your annual income plus any outstanding liabilities. For example, if your annual income is ₹10 lakh and you have a ₹30 lakh home loan, you should consider coverage of ₹1.3–₹1.8 crore.
Also factor in your children's education expenses, spouse's retirement needs, and inflation. You can use online insurance calculators to estimate your ideal coverage.
Term vs Other Life Insurance Plans
| Feature | Term Life Insurance | Whole Life Insurance | ULIP |
|---|---|---|---|
| Purpose | Pure risk cover | Lifetime cover | Insurance + investment |
| Premium | Low | High | High |
| Payout | Only on death | Death or maturity | Death + market returns |
| Best For | Income replacement | Estate planning | Long-term wealth building |
Factors Affecting Premiums
- Age — younger = lower premiums.
- Health condition and lifestyle habits (smoking, alcohol).
- Policy term length.
- Sum assured amount.
- Additional riders chosen.
Useful Riders
- Accidental Death Benefit Rider — Extra payout if death is due to accident.
- Critical Illness Rider — Lump sum on diagnosis of major illnesses.
- Waiver of Premium Rider — Waives future premiums if you become disabled or critically ill.
How to Buy the Right Policy
- Decide on coverage based on your income, debts, and family needs.
- Compare plans on trusted portals like PolicyBazaar or BankBazaar.
- Check insurer’s claim settlement ratio on the IRDAI website.
- Disclose all health and lifestyle details honestly.
- Choose annual premium payment mode to save on costs.
Mistakes to Avoid
- Underestimating required coverage to save on premiums.
- Not comparing multiple insurers and plans.
- Ignoring riders that could be crucial for your situation.
- Not reviewing coverage every few years as income and expenses grow.
FAQs
Can I increase my term cover later?
Yes, many insurers allow increasing coverage at life events like marriage or childbirth.
Do I need medical tests?
For higher sums assured or if you have health issues, insurers may require medical tests.
Is online purchase safe?
Yes, buying directly from the insurer’s website or reputable aggregator is secure and often cheaper.
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