Term insurance: Overview
  • Meaning of term insurance
  • How it works
  • Why it is important
Term insurance Overview
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What is Term Insurance?

Term insurance is a type of life insurance policy that offers life protection for a certain number of years and pays death benefits to the nominee in case of your uncertain death during the policy tenure.

Term life insurance plans are pure protection plans that do not offer any investment opportunities and thus offer no returns.

How Does Term Life Insurance Work?

Let us understand this by an example:

Vaibhav, a 30-year-old salaried individual lives a comfortable life with his family in Gurugram, Haryana.

Vaibhav decides to buy a term insurance plan of 2 crores so that if something happens to him, his family will receive these 2 crores as the death benefit.

Vaibhav buys the plan for a tenure of 40 years and chooses his wife as the nominee. So now, during these 40 years, if Vaibhav passes away, the sum assured will be given to his wife and the policy will terminate.

Types of Term Insurance Plans

Suppose you are planning to buy term insurance.You will go through multiple plans available in the market, and many insurance companies claim they are the best, which can confuse anyone.

But What to choose let’s us help you out,

There are a total of six categories of term insurance available in the market. Let’s understand each one of them:

  1. Level term plans

    Level-term insurance plans are the basic term plans in which the policyholder pays the same premiums throughout the policy term, and an assured death benefit will be paid in case of the policyholder's death.

  2. TROP (Return of premiums plans)

    TROP Plans come with dual benefits; apart from the sum assured, the premiums paid will also be returned to the policyholder if they survive the whole policy term after the deduction of taxes.

  3. Increasing Term Plans

    Increasing term insurance plans offer options to increase the basic sum assured of plans at different milestones of life of the policyholder such as marriage, childbirth, and second childbirth while paying the same premium amount during the entire policy term.

  4. Decreasing Term Plans

    In decreasing term insurance plans, the total sum assured amount decreases over time as one part of the premium is used to pay the loan of the policyholder thereby decreasing the loan as the policy continues. After the demise of the policyholder, the death benefit paid is the sum assured minus the loan amount.

  5. Zero Cost Term Plans

    The zero-cost term plan offers a special exit option to the policyholder after they have completed a certain number of years with the active policy. The insurer decides the tenure that the life assured has to endure before exiting the plan. Once the policyholder surrenders the plan, all the premiums paid are given back after the deduction of taxes and the policy terminates.

Key Features of Term Insurance

Life is very uncertain, continuously surrounded by multiple risks, diseases, accidents, or death. Term insurance in such scenarios comes in handy because it offers the financial aid that is utmost needed when these things happen. Let’s look at all the features of term insurance to understand it better.

  • Affordability

    Term insurance policies come with affordable premium prices compared to other insurance policies.
  • Age of Entry

    The entry age for purchasing term life insurance is just 18. Most of the insurers ask for income proof as well while buying a term insurance policy. Buying term insurance at a younger age will help you pay lower premiums for a higher sum assured.
  • Policy Term

    Policy Term is defined as the total no. of years under which the policyholder is covered; in any unfortunate event that occurs during that period, the nominee will get a sum assured.
  • Policy Term

    Policy Term is defined as the total no. of years under which the policyholder is covered; in any unfortunate event that occurs during that period, the nominee will get a sum assured.
  • Maturity Benefit

    If the policyholder survives the full policy term, under the TROP and zero cost term plans, they can get all the paid premiums back on completion of the policy term.
  • Flexibility in Premium Payments

    Term insurance offers flexibility to the customers for paying premiums. Customers can choose annual, half-yearly, quarterly, or monthly payments according to their own convenience.
  • Whole Life Cover

    Customers can choose whole life cover or tenure for a shorter time as per their requirements in term insurance. For example, a younger customer with fewer responsibilities can buy a term plan with less coverage and fewer years & a family guy with more responsibilities should buy a term plan with more range.
  • Tax Benefits

    Customers can opt for tax benefits under sections 80C (max 1.5 lakh) and 80D(max 50k) under the Income Tax Act 1961.

Who Should Buy Term Life Insurance?

who should consider term plan

How Much Life Cover Do I Need With a Term Insurance Plan?

Before buying a term insurance plan make sure you have decided how much coverage you need. Ideally, your term life cover should be 15 to 20 times your annual income.

Here is a list of the factors you should consider before calculating your ideal term insurance coverage amount:

  • Analyze your monthly expenses
    The first step before deciding about life cover is to analyze your monthly expenses and study the inflation rate; a suitable life cover can provide financial support to your family in your absence without negotiating the cost of living.
  • Calculate your financial liabilities
    Count your major liabilities like debts, loans, your children’s education, marriage, home loans, and business loans. Your coverage should be sufficient to cover these as well.
  • Age
    A 50 lakh term plan is suitable for a 20-year-old person, while a 1 Crore term plan looks less worthy for a 30-year-old married person. Since the responsibilities are increased according to different phases of life you should make sure to choose the right life cover to cover up your expenses in tough times.
  • Tenure of your Plan
    Term insurance Provides insurance coverage for a particular term; you have to plan accordingly after analyzing your liabilities like - child Education and marriage. You have to make sure that these events occur during your policy term.
  • Cost of the Premiums
    The cost of the premiums plays a very important role in your budget. It should not be higher, as you are compromising with the other expenses, and it should not be lower, resulting in a reduced life cover amount. So You have to study and make a budget for premium amounts.
  • Cost of Term Insurance Plans
    Here we have taken a premium illustration for a 35-year-old male, who doesn’t smoke. The policy tenure is of 30 years and the coverage amount is 1 crore. The premiums that the individual has to pay for top 5 term insurance plans in the market are:

Annual premiums for top 5 term insurance policies in India

The following premiums are for a 30-year-old non-smoker male with a coverage of 1 crore.

Insurer Plan Name Premium for Pure Term (in INR) Premium for TROP (in INR)
ICICI PRU iProtect Smart 17,647 40,455
HDFC Life Click 2 Protect Super 18,934 47,712
Max Life Smart Secure Plus 16,513 30,734
Bajaj Allianz Life Insurance Bajaj Allianz Life eTouch 14,628 25,888
Canara HSBC Young Term Plan - Life Secure 14,003 25,005

Term insurance: Overview: FAQ's

1. What is the difference between Term insurance and life Insurance?

Term insurance covers the insured for a specific period, whole life insurance covers the insured for a lifetime.

2. Who is eligible for term insurance?

Any individual at least 18 years of age with a monthly income is eligible to purchase term insurance.

3. Can I buy term insurance for my parents?

Yes, you can purchase term insurance for your parents.

4. What is the maximum age limit of term insurance?

The maximum age limit to purchase term insurance is 65 years.

5. What kind of deaths are not covered in a term insurance plan?

Death caused by consumption of any intoxication, homicide, or disease that is not disclosed during purchasing the term plan is not covered in a term plan.

Other Term Insurance Companies

What Our Customers Have to Say

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May 20, 2024

SUD Life term plan truly stands out my expectations as I got SUD Life term plan along with additional riders at very affordable premiums.

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May 20, 2024

I am impresses with the hassle free and quick claim settlement process of SUD Life. Thanks to PolicyX who guided me to get my claim settled.

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May 20, 2024

Bought SUD Life Family Income Benefit Rider plan to secure the future of my plan financially even in my absence.

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May 20, 2024

I was looking for a term plan to secure the future of my family. So I contacted PolicyX and one of their representatives Mr. Vaibhav helped me choose SUD Life term plan.

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Armaan khan


May 17, 2024

I recently purchased a Pramerica term insurance policy from Policyx.com. The customer service team was very helpful in answering all my queries and guiding me through the application process. I...

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Rahul Yadav


May 17, 2024

PolicyX’s dedicated support made renewing my Bandhan Life Insurance policy easy. I’m absolutely delighted with the service offered by PolicyX Insurance Advisor.

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Priyanshu Sharma


May 17, 2024

I bought a Bandhan Life Insurance through PolicyX, and I must say the level of communication and assistance I have received has been truly impressive.

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Yash Tomar


May 17, 2024

After getting advice from the PolicyX experts, I chose a Bandhan Life Insurance term plan. Thank you, PolicyX, for helping me buy a term plan at such a low premium.

Varun Saxena

Written By: Varun Saxena

Varun is a passionate content writer with over three years of experience in the insurance domain. An avid learner, he stays ahead of the industry's trends ensuring his writing remains fresh and includes the latest insurance shifts. Through his work, Varun strives to engage with targeted insurance readers.