Term Insurance India: All You Need To Know Before Purchasing 2025

In terms of financial planning, securing the future of your family is the first thing. Investments, savings and assets are important, but there is no alternative of providing security like insurance. To provide a surety that your loved ones are well off in case anything happens to you, there is a wide variety of India insurance products, the term insurance is the least expensive and most efficient to have.

Everything you need to know about term insurance and its definition, the necessity to have it, its amount, where to purchase it, and most important aspects to keep in mind will be covered in this blog.

Table of Contents

What is Term Insurance?

The purest and the simplest form of life insurance is term insurance. It is a financial protection cover to your family in an event of your untimely demise during the policy period.

You are charged a premium (monthly, quarterly or annually).
Upon your demise during the period of policy, the insurer pays the sum assured (the amount of cover) to your nominee.
On surviving through the policy term, you have no maturity benefit (except where you choose return-of-premium plans, which are more expensive).

Concisely, term insurance is not a saving or an investment, but a plain pure protection.

The Importance of Term Insurance?

Some have a fear of purchasing term insurance, because they believe that they are wasting the money as they do not give returns. However, what is actually happening, is that it is one of the most vital financial tools you will ever buy.

Here’s why:

Secures the Lifestyle of your Family – In case you are an earning earner, your income is used to meet the needs of your family. Term insurance takes your place in the event that you are not around.
Pays off liabilities- In case you have home loans, car loan or personal loans then term insurance pays off so that your family does not have to pay EMIs after you.
Meets the Rising Costs – Education and healthcare expenses along with living costs are on the rise with inflation. A big term cover is one which assists your family in taking care of these costs.
Peace of Mind – When you know that you have not to worry about your family suffering due to financial reasons in case something wrong occurs to you, you have a peace of mind.

The amount of term insurance to purchase?

It is among the most frequently asked questions. It is necessary to have the right coverage based on your income, expenditures, and financial liabilities.

A general thumb rule is:

Sign a term cover 10-15 times of your income annually.

For example:

A cover of at least Rs1-1.5 crore should be adopted in case your annual income is [?]10 lakh.

Also consider:

Outstanding debts (add them to your cover).
Future aspirations (education of children, marriage, housing at retirement of spouse).

When is it time to purchase term insurance?

The most appropriate time is whenever possible. The premiums are lower when one is young and healthy. For example:

A 25-year old non-smoker can purchase a Rs1 crore cover with a minimum of Rs 500-600 per month.
The same cover will require the same cover to cost twice at 35 or 40.

The longer one delays the higher the cost involved and the chances of rejection are likely to happen since of health concern.

India: Where Do You Buy Term Insurance?

It is now easy and transparent to purchase term insurance. You are able to buy it online and offline.

1. Online Platforms

Sites of insurance companies (LIC, HDFC Life, ICICI Prudential, SBI Life, Max Life, etc.).
Plans can be compared online through Online aggregators such as Policybazaar, Coverfox and BankBazaar.

Benefits of online purchase:

Lower premiums (no middlemen).
Easy comparison of features.
Hassle-free documentation.

2. Offline (Agents/Banks)

You can purchase also via insurance agents or your bank.
Good in case you want a personal guidance but premiums might be a bit more because of commissions.

Term Insurance Riders and Add-ons

You can augment your policy with riders, at an additional fee, with insurers:

Critical Illness Rider – It is a lump sum paid out in case of diagnosis with such serious illnesses like cancer, heart attack, etc.
Accidental Death Rider – is an extra payout in the case of accidental death.
Waiver of Premium Rider – The Future premiums are waived in case you are disabled or critical.

What to examine Before Purchasing Term Insurance

Claim Settlement Ratio (CSR)– The larger the CSR the greater your claim is likely to be settled. Insures with CSR of above 95 should be always selected.
Premium Affordability – Do not go over the top; choose a plan that has affordable premiums.
Policy Term – The policy ought ideally to last till the age of 60-65, i.e. your retirement age.
Exclusions – The point not to cover is read, such as suicide within the first year, some underlying conditions, etc.
Honesty in Disclosure- You must always disclose your health conditions, smoking habits/drinking habits and policies you have.

Final Thoughts

Term insurance is not investment, it is a back-up. It is something that guarantees you that though you may not be present, the financial aspirations of your family and all its daily requirements will not be compromised.

To the Indian citizens, term insurance is affordable and accessible given the availability of online platforms. With a small share of your income, you will be able to insure your family with a huge cover.

Therefore, do not delay and get a term insurance policy at an early age and select the appropriate coverage and lead a stress free life knowing that your loved ones are safe.