Insurance in India is gradually growing. In FY 2025, the average premium per person, or insurance density, rose to USD 97 from USD 95 in FY 2024. Life insurance density also increased, reaching USD 72, up from USD 70 the previous year. Amid this expanding market, term insurance stands out as a simple, cost-effective way to ensure your family’s financial security.
Most people spend years building savings, assets, and a better life for their family, but forget to protect it. That’s where term insurance steps in. It acts like a financial safety net, ensuring your loved ones don’t struggle if something happens to you.
This guide walks you through everything you need to know about term insurance. It explains how term insurance works, its benefits, and the different types of plans. You will also learn about policy inclusions and exclusions. It shows how to calculate the right coverage and premiums, and helps you choose the right insurer and policy structure. Finally, it gives a step-by-step guide to buying term insurance online.
Confused about which term plan aligns with your family goals? Don’t worry, we’ve got you covered. Book a free call or chat with a Ditto advisor, and let us help you out.
Take Note
Life insurance includes different products. Some focus only on protection, while others combine protection with savings or investment. Term insurance is a type of life insurance plan that pays a death benefit if you die during the policy term.
It does not offer savings or maturity payouts, so premiums are lower than plans like endowment policies or Unit Linked Insurance Plans that combine life cover with investments. At Ditto, we focus on term plans as it is a cost-effective way to secure your family’s financial future.
How Term Life Insurance Works?
- You pick your sum assured (SA), policy term, and premium payment option.
- The insurer evaluates your overall profile based on its underwriting guidelines and then decides whether to issue the policy or not.
- Once your term policy is issued, you keep paying premiums to maintain the cover.
- If you pass away during the term, your nominee receives the chosen benefit.
- If you survive the term, the policy ends without any payout unless you opted for a return-of-premium version.
What is the Purpose of Term Life Insurance?
Term life insurance provides financial protection to your family if you pass away during the policy term. It ensures that your dependents can maintain their lifestyle, pay off debts, cover living expenses, and meet future goals like education or retirement, without being burdened financially.
Key Features of Term Insurance
| Aspect | Feature |
|---|---|
| Entry Age | Minimum is 18, and maximum is 65 years |
| Maturity Age | Minimum is 28, and maximum is 85 years. It may go up to 99 or 100 years for whole life term plans. |
| Payout Options | Lump sum, monthly income, and combined |
| Premium Payment Mode | Annual, half-yearly, quarterly, and monthly |
| Premium Paying Term | Regular pay, limited pay, single pay |
Note: Such features and eligibility may vary from plan to plan.
Benefits of Term Insurance
- Debt and Dependent Protection: A term plan primarily acts as a replacement for your income and outstanding loans, ensuring your family is financially secure and not burdened with debts if something happens to you.
- Protection Against Goal Failure: It helps safeguard important life goals, including children’s education, rent, childcare, and elder care, so your family’s plans stay on track even in your absence.
- Rider Benefits: Additional riders such as Critical Illness, Accidental Total & Permanent Disability, and Waiver of Premium provide enhanced protection beyond the base sum assured.
- The Advantage of Buying Early: Purchasing a term plan at a younger age not only lowers premiums but also reduces the likelihood of exclusions or premium loadings, as your health profile is cleaner.
- Higher Coverage at Lower Premiums: Term life insurance offers high coverage at more affordable premiums than other types of life insurance.
- Premium Stability: Premiums remain fixed throughout the term plan, and your premium payments are flexible.
- Flexibility: You get monthly, quarterly, half-yearly, or yearly premium payment options.
- Less Appreciated Perks: Many insurers offer free or discounted medical check-ups, and virtual assessments are increasingly common, adding value beyond the core financial protection.
- Tax Benefits: Under Section 80C, you can claim a deduction of up to ₹1.5 lakh on the premium paid for a term insurance policy. Section 80D allows an additional deduction if the policy includes health-related riders, both under the old regime. Finally, under Section 10 (10D), the death benefit received by the nominee is entirely tax-free.
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What is the Moratorium Period in a Term Policy?
As per IRDAI guidelines, after three continuous years of holding a term insurance policy, the insurer cannot reject a death claim due to non-disclosure, misstatements, or incomplete information, unless fraud is proven. This period provides added security and protection for long-term policyholders.
Types of Term Insurance
| Type | Feature | Example |
|---|---|---|
| Level | This keeps your SA fixed throughout the policy term. Premiums also stay constant. These plans are ideal for families seeking stable protection for long-term financial security. | If you choose a ₹2 crore cover for 40 years, your nominee will receive ₹2 crore whether a claim happens in year 1 or year 40. Bajaj Life eTouch II offers this option. |
| Increasing | This offers a cover amount that rises every year or at set intervals. It helps keep up your protection with inflation and growing responsibilities. | HDFC Life Click2Protect Supreme Plus offers 5% (each year) and 10% (every 5 years) up to 100% increasing term options across its plans. This term type requires you to pay higher premiums over time when compared to level term insurance. |
| Decreasing | This reduces the SA each year, usually in line with falling liabilities such as home loans. These plans suit people with very specific debts. | HDFC Life Click2Protect Supreme Plus offers a decreasing cover option via its life goal variant. If you opt for this variant your Cover stays level initially, then reduces annually. |
| Return of Premium (TROP) | This type returns your base premiums if you survive the policy term. This suits low-risk buyers who want guaranteed returns. However, your returns don’t grow, and rider premiums aren’t refunded. | Axis Max Life and HDFC Click2Protect Supreme Plus offer TROP with comprehensive coverage, but your premiums are much higher (generally 80-100%) than regular term plans. |
These are the three main types of term insurance offered by insurers. Meanwhile, check out the add-ons you can opt for and avoid with your term policy: