Term insurance is the simplest form of life insurance. It pays a lump sum to your nominee if you pass away during the policy term. It does not offer maturity benefits. That is why premiums are significantly lower compared to endowment or money-back policies.
For example, a healthy 30-year-old non-smoker may get ₹1 crore term cover for approximately ₹8,000–₹15,000 annually depending on insurer and tenure. The same ₹1 crore cover in a traditional endowment plan could cost several times more due to built-in savings component.
The goal of term insurance is income replacement, not returns.
How Much Cover Do You Actually Need
Most financial planners recommend coverage equal to 10–15 times annual income. However, a more accurate method considers liabilities and goals.
Here is a structured calculation:
| Component | Example Amount |
|---|---|
| Annual income | ₹10,00,000 |
| Recommended multiple (12×) | ₹1.2 crore |
| Outstanding home loan | ₹40 lakh |
| Children education goal | ₹30 lakh |
| Total required cover | ₹1.9 crore |
In this scenario, ₹2 crore coverage is more appropriate than ₹1 crore.
Always factor in liabilities and dependents before deciding coverage.
Claim Settlement Ratio: What It Means
Insurers publish claim settlement ratio (CSR), which indicates percentage of claims settled versus total claims received in a year.
Example:
| Insurer | Claim Settlement Ratio (Recent Data Approx) |
|---|---|
| Insurer A | 98%+ |
| Insurer B | 97%+ |
| Insurer C | 99%+ |
While CSR above 95% is generally considered strong, do not choose purely based on highest number. Large insurers with high volume often provide consistent service reliability.
Choosing Policy Term Correctly
Policy term should ideally extend until retirement age or financial independence stage.
| Current Age | Suggested Policy Term |
|---|---|
| 25–30 | Till age 60–65 |
| 30–40 | Till 60 |
| 40–45 | Till 65 (if late start) |
Avoid unnecessarily extending beyond retirement if no financial dependency exists.
Riders: Which Ones Matter
Riders increase premium but may provide valuable coverage.
Common riders:
| Rider Type | Useful When |
|---|---|
| Accidental Death Benefit | High travel exposure |
| Critical Illness Rider | No separate health CI cover |
| Waiver of Premium | Ensures policy continuity if disabled |
Do not add riders blindly. Compare cost versus standalone policies.
Premium Comparison Example
For a 30-year-old healthy male, 30-year term:
| Cover Amount | Annual Premium (Approx Range) |
|---|---|
| ₹50 lakh | ₹5,000–₹8,000 |
| ₹1 crore | ₹8,000–₹15,000 |
| ₹2 crore | ₹15,000–₹28,000 |
Premium depends on age, smoking status, medical history, and insurer underwriting.
Buying early reduces cost significantly.
Medical Disclosure Is Critical
Non-disclosure of health conditions is the most common reason for claim rejection. Always disclose:
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Smoking or alcohol habits
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Pre-existing illnesses
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Previous surgeries
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Existing insurance policies
Even minor omissions can complicate claim process later.
Honesty protects your nominee.
Online vs Offline Purchase
Online policies often have lower premiums because agent commissions are not built into pricing. However, customer service support quality varies.
Choose insurer with:
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Strong claim track record
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Transparent policy wording
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Clear online tracking process
Premium difference should not override reliability considerations.
When You Don’t Need Term Insurance
If you have:
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No dependents
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No loans
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Substantial assets already generating income
Then term insurance may not be essential.
Term insurance exists to protect dependents from income loss.
Tax Benefits
Premiums qualify under Section 80C (subject to overall ₹1.5 lakh cap). Claim amount received by nominee is generally tax-free under prevailing rules.
However, tax benefit should not be the primary reason to buy.
Conclusion
Term insurance is about financial security for your family, not wealth creation. Choose coverage based on income replacement and liabilities. Prioritize full disclosure and reasonable policy term. Compare premiums, but focus on insurer reliability and claim settlement history.
The right term policy is simple, sufficient, and transparent.
FAQs
Is ₹1 crore cover enough?
It depends on income, liabilities, and goals. For many urban households, ₹1 crore may be insufficient.
Does smoking increase premium?
Yes. Smokers pay significantly higher premiums due to increased risk.
Should I buy riders?
Only if they address a genuine risk not covered elsewhere.
Is claim settlement ratio the only factor?
No. Consider insurer reputation, underwriting clarity, and service support as well.