Term insurance is like a promise. You pay some money to an insurance company every year or every month. In return, if something happens to you (like you pass away), the company gives money to your family.
It’s not like saving money. It’s more like protecting your family if you are no longer there.
If you are the person who earns money for your family, and something bad happens, how will your family live?
Term insurance helps them by giving them a big amount of money called sum assured .
Why Do People Buy Term Insurance?
Most people buy term insurance to make sure their family stays safe financially .
For example:
- If you have children, they can still go to school.
- Your spouse can pay bills and house rent.
- You can leave behind money without worrying about loans or debts.
So, term insurance is not for you — it’s for the people who depend on you.
How Does Term Insurance Work?
Let’s take an easy example.
You are 35 years old. You earn ₹50,000 per month.
You buy a term plan that gives ₹1 crore to your family if you die during the policy period.
You pay around ₹1000–₹2000 every year for this.
If you live long, the company does not give you any money .
But if you die during the policy time, your family gets ₹1 crore.
That’s why term insurance is also called pure risk cover – you only get money when the risk (death) happens.
Who Should Buy Term Insurance?
Term insurance is best for:
- Working people who have a family depending on them.
- Parents with young kids.
- Home loan holders – because if you die, your family won’t have to pay the loan from their pocket.
- Newly married couples – to protect each other.
Even women can buy term plans. It’s not just for men.
Types of Term Insurance Plans
There are different kinds of term plans. Let’s see what they mean in simple words.
| Type of Term Plan | Meaning |
|---|---|
| Level Term Plan | You get the same sum assured throughout the policy. |
| Increasing Term Plan | The sum assured increases over time. Good for inflation. |
| Decreasing Term Plan | The sum assured goes down over time. Used with home loans. |
| Return of Premium (ROP) | If you survive, you get back all the money you paid. But it costs more. |
Top Term Insurance Companies in India (2025)
Here are some of the best companies for term insurance:
| Company Name | Features |
|---|---|
| LIC | Trusted, but sometimes expensive |
| HDFC Life | Easy process, good customer service |
| ICICI Prudential | Fast claim settlement |
| Max Life | Affordable plans |
| Aegon Life | Online process, very easy |
| Kotak Life | Strong brand, good support |
| Bajaj Allianz | Competitive rates |
| Aditya Birla Sun Life | Flexible options |
Always check how fast a company gives money when needed. That’s called “claim settlement ratio.” Higher is better.
How to Choose the Best Term Plan?
Choosing the right term plan is very important. Here’s how to do it:
1. Decide the Sum Assured
This is the money your family will get.
A simple rule: at least 10 times your annual income .
Example:
- You earn ₹6 lakh per year.
- Your term plan should be at least ₹60 lakh.
Some experts say even 15–20 times your income.
Also, think about:
- Your children’s education
- House loan
- Monthly expenses
2. Choose the Right Policy Term
How long do you want the plan to run?
Usually:
- For young people (30s): 30-year term
- For older people (40s): 20-year term
- Minimum term: 5 years
3. Check the Claim Settlement Ratio
This shows how many claims a company accepts out of 100.
Example:
- LIC: 98%
- Max Life: 97%
- ICICI Prudential: 96%
Choose a company with at least 95% .
4. Compare Premiums
Premium is the money you pay every year/month.
Use online tools to compare.
Sometimes the same plan costs less if you buy it online.
5. Add Riders (Optional)
Riders are extra benefits you can add to your plan.
Common riders:
- Critical illness rider – gives money if you get cancer, heart attack, etc.
- Accidental death rider – gives extra money if you die in an accident.
- Disability rider – helps if you lose your job due to injury.
These cost extra, but can help.
Documents Required for Buying Term Insurance
When you buy term insurance, you need to give some documents.
Here’s what you might need:
- Identity Proof – Aadhaar Card, PAN Card
- Address Proof – Voter ID, Electricity Bill
- Income Proof – Salary Slip, Bank Statement
- Health Report – Some plans ask for medical tests
- Nominee Details – Whom to give money in case of death
Don’t worry – most companies guide you step by step.
How to Apply for Term Insurance?
Here’s how to apply:
- Step 1 – Decide Coverage : How much money you want to leave for your family.
- Step 2 – Compare Plans : Use websites like Policybazaar, Coverfox, or directly go to company sites.
- Step 3 – Fill Application Form : Online or offline.
- Step 4 – Submit Documents : Upload required papers.
- Step 5 – Medical Test (if needed) : Some companies ask for health check-up.
- Step 6 – Pay Premium : Make payment using net banking, UPI, card, etc.
- Step 7 – Get Policy : You’ll get a PDF copy of your policy.
Tips to Buy the Best Term Plan
Here are some smart tips:
- Buy early – younger people get cheaper rates.
- Don’t lie about your health – it can cause problems later.
- Always name a nominee – someone who will get the money.
- Set reminders for premium payments – don’t miss them.
- Read the fine print – know what is covered and what is not.
- Buy only as much as you need – don’t over-insure.
Common Mistakes to Avoid
Many people make mistakes when buying term insurance. Here are a few:
- Buying too little coverage – Don’t choose ₹10 lakh if you earn ₹10 lakh per year.
- Not naming a nominee – Without a nominee, the claim may get stuck.
- Hiding medical history – This can lead to rejection of the claim.
- Choosing ROP just to get money back – It’s okay, but it costs more.
- Not reading the terms – Know what cases are covered and not covered.
Can I Cancel My Term Plan?
Yes, you can cancel your term plan within 15 days of buying it. This is called the free look period .
If you cancel after that, you may not get any money back (unless it’s a Return of Premium plan).
Final Thoughts and tips:-
- Term insurance protects your family if you pass away.
- It’s cheap and gives high coverage.
- Choose the right sum assured and term.
- Compare different plans before buying.
- Keep your documents ready.
- Always read the terms carefully.
- Buy early for lower prices.
- Think of your family first – not yourself.
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