Written By: DIVYA SINGH

DIVYA SINGH

Term and Life Insurance

Divya Singh is an associate writer at PolicyX.com with over 1 year of experience in creating diverse forms of content. She specializes in breaking down complex terms and life insurance topics into clear, practical insights for readers. Her approach combines thorough research with a simple, engaging style, ensuring that customers can understand policies without confusion.

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Reviewed By: Apeksha Parsai

Apeksha Parsai

Term & Health Insurance

Apeksha has trained young minds about the benefits of health & term insurance throughout her 8+ years career. She designs, develops, and delivers impactful training programs for agents/brokers, and internal teams. Her expertise lies in insurance product knowledge, sales strategies, regulatory compliance, and customer service.

Updated on Dec 15, 2025 5 min read

Introduction

Life is unpredictable; you need to prepare for it to secure your loved ones. A term insurance plan is the affordable and simplest way to do so. If you are the bread-earning member in your family, go for a higher cover - about 20-25 times your annual income. Term insurance plans are a savings plan as they help your family maintain their lifestyle, fund future goals, or pay off loans even in your absence. This article will answer the question of who actually needs term insurance and clear your confusion regarding the stage at which you should have one.

Is term insurance right for you?

If you are figuring out whether you really need term insurance, the answer totally depends on one question: Would someone suffer financially if you weren’t around?

Term insurance does not just limit to the wealthy or elderly- it is for anyone with responsibilities. If you have financial commitments such as education expenses, ageing parents to support, or home loan, or a family that relies on your income, term insurance would be an essential and smart choice for you. However, if you are single with no financial burden and no major liabilities, you may not need insurance yet, but starting a an early age can still lock in low premiums for the future. In brief, anyone who wants to leave behind financial safety should go for term insurance.

Who Should Buy a Term Insurance Plan?

A term plan can be useful for many, including those who are the breadwinners or the ones who make non-monetary contributions to the house. In short, every earning individual should save for term insurance, but here are the people who genuinely need an insurance policy:>

1. Young professionals

   Youngsters who have just started their business or a job think term insurance is for later. But they should consider the other side, that if they buy a term plan now, they will lock in a relatively lower premium for their plan. Even if they have no responsibility yet, the future obligations and family planning are in line.

2. Sole breadearners

   When you are the only one in the family earning, financing the loans, medicines, whether you are married or unmarried, having a term plan is non-negotiable. The sudden demise of the sole earner will degrade their standards. As a salaried, freelancer, or self-employed, if you have dependents, you should get a term plan.

3. Married individuals

   In marriage, men and women share responsibilities, whether it is creating investments, buying a house, or planning a family. So, if a partner passes away, it drastically affects the other one. Joint venture or individual policies ensure that they are both financially secured.

4. People with loans and liabilities

   Most middle-class families need loans to achieve their long-term goals, such as buying a home or a car. If something happens to you, then it becomes very difficult for your family to handle the financial burden with the emotional imbalance. But when you have a term plan, all the loans and liabilities will be covered.

5. Entrepreneurs:

   Owning a business brings inexplicable joy, but it comes wth unsteady income. However, they are liable for business loans and their financial stability. For them, term insurance will not only protect their families but also provide some security to the co-owners, if used in the right manner. The death benefit can also support your business even in your absence.

6. Single parents:

   Whether the partner is separated from the other one or has died in an unfortunate event, your children would be dependent on you for daily expenses and educational expenses. Therefore, the term plans help secure your children’s future with a lump sum amount.

Choosing the right term plan for your needs

Picking the adequate insurance plan depends on your responsibilities, age, and your dependents.

• If you are the main earning member in your family, go for a higher cover, 10- 15 times your annual income. If you have elderly parents or kids, choose a policy that provides both monthly income and lump sum payouts. Add-ons like an accidental death benefit can also be crucial.
• Entrepreneurs with major business liabilities can name their business partners as nominees, depending on their needs.
• Young professionals can start with a basic term plan that provides a modest coverage amount and long-term protection.
• If you have loans like a home loan, ensure your term policy can cover the outstanding debt amount, so your family is not burdened.
• Term plan premiums qualify for basic tax deductions under Section 80C, and death benefits are tax-free under Section 10(10D) of the Income Tax Act.
• Select a policy term that is compatible with your long-term financial goals. Ideally, it should cover you until your major financial obligations or expected retirement age-like children’s education or home loans, are complete.

Choosing the right cover amount

Be it an entrepreneur, a single parent, a salaried, self-employed, or sole earner, everyone has only one doubt: how much cover do I really need? The solution relies on your debts, income, lifestyle, and the future needs of your family. You can calculate this by:

• Rule of thumb: You should start with 20-25 times your annual income, considering existing debt and future requirements.
  So, if your salary is ₹10 lakh per year, you should opt for a term plan of ₹2 crore to ₹2.5 crore.
• Use the DIME method: Consider the following factors before taking the plan: Debt, Income Replacement, Mortgage and Education, and Expenses. Here’s how you can calculate the premium:
  • Loans: ₹30 lakh
  • Income Replacement (₹10L x 15 years): ₹1.5 crore
  • Education: ₹25 lakh
  • Total Cover Needed: ₹2.05 crore

When selecting the best term plan, it’s important to consider factors such as the claim settlement ratio, solvency ratio, and any beneficial inbuilt features. Make sure to include these aspects in your decision-making process.

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