Term insurance is one of the most important financial tools for Indian families. It gives
financial protection to your loved ones if something happens to you. Many people delay
buying term insurance due to confusion or lack of awareness. This guide will help you
understand term insurance clearly. It will also help you make the right buying decision in
India.
This article explains term insurance in simple words. It covers benefits, how much cover you
need, how to choose the right plan, and common mistakes to avoid.
What Is Term Insurance?
Term insurance is a pure life insurance plan. It provides a fixed sum assured to your nominee
if you pass away during the policy term. If you survive the policy term, no money is paid.
It is affordable and gives high coverage at a low premium. This is why term insurance is
ideal for income earners in India.
Why Term Insurance Is Important in India
Indian families often depend on one earning member. If that person is no more, the family can
face financial trouble. Term insurance helps in such situations.
Here are the main reasons to buy term insurance:
- It replaces lost income for your family
- It helps clear home loans and personal loans
- It supports children’s education and marriage
- It offers peace of mind at a low cost
How Much Term Insurance Cover Do You Need?
Choosing the right cover amount is very important. Underinsurance can put your family at
risk.
A simple rule is to buy cover worth 10 to 15 times your annual income.
You should also consider:
- Current income
- Future income growth
- Existing loans
- Family expenses
- Children’s future goals
Example:
Example:
If your annual income is ₹6 lakh, your term cover should be at least ₹60 lakh to ₹90 lakh.
How to Choose the Right Policy Term
The policy term should ideally cover your working years.
Most people choose a term till age 60 or 65.
You can select the term based on:
- Retirement age
- Loan tenure
- Financial responsibilities
Longer policy terms usually offer better protection.
Types of Term Insurance Plans in India
There are different types of term plans available:
Level Term Plan
The sum assured remains the same throughout the policy term.
Increasing Term Plan
The sum assured increases over time. Useful to beat inflation.
Decreasing Term Plan
The sum assured reduces over time. Often used for loan protection.
Term Plan with Return of Premium
Premiums are returned if you survive the policy term. Premiums are higher.
Riders You Can Add to Term Insurance
Riders increase coverage by paying a small extra premium.
Common riders in India include:
- Accidental Death Benefit Rider
- Critical Illness Rider
- Waiver of Premium Rider
- Permanent Disability Rider
Choose riders based on your needs. Avoid unnecessary add-ons.
How to Choose the Best Term Insurance Company
Do not choose a policy only based on low premium.
Check these factors before buying:
- Claim settlement ratio
- Customer reviews
- Solvency ratio
- Policy features
- Ease of claim process
A reliable insurer ensures your family gets money without hassle.
Online vs Offline Term Insurance
Buying term insurance online is popular in India.
Benefits of Buying Online:
- Lower premiums
- Easy comparison
- Transparent features
- Quick purchase
Offline buying may be helpful if you need personal assistance, but premiums are usually higher.
Common Mistakes to Avoid While Buying Term Insurance
Avoid these mistakes to make a smart decision:
- Buying insufficient cover
- Hiding health details
- Choosing policy only based on price
- Not adding nominee details
- Delaying purchase
Always give correct information to avoid claim rejection.
When Is the Right Time to Buy Term Insurance?
The best time to buy term insurance is as early as possible.
Buying early helps because:
- Premiums are lower
- Health risks are fewer
- Long-term coverage is easy
Young professionals should consider buying term insurance as soon as they start earning.
Tax Benefits of Term Insurance in India
Term insurance also offers tax benefits.
- Premiums qualify for deduction under Section 80C
- Death benefit is tax-free under Section 10(10D)
This makes term insurance a tax-efficient protection plan.
Final Thoughts
Term insurance is not an expense. It is a necessity for every earning Indian. It protects your family’s future when they need it the most.
Choose the right cover. Select a trusted insurer. Buy early and stay protected.
A well-chosen term insurance plan ensures your family’s financial security, even in your absence.