Term insurance is a type of life insurance policy that adds a financial safety net for your family members or dependents in case of unfortunate life events. Such an insurance product provides coverage for a specified period of time, such as 10, 20 or 30 years or more, depending on the insurer and as agreed upon by you at the time of purchase.
In exchange for financial security to your dependents in your absence, you must keep your policy active by paying the set premium as per your chosen plan, tenure and other factors.
To financially secure your family against uncertainties of life, explore the best term life insurance plans, their features and benefits with Pluto and make an informed decision.
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Written by Ayush
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What is Term Insurance?
Term life insurance is a form of pure life insurance which provides financial protection to the chosen beneficiary of a policyholder for a fixed duration or term.
For easier understanding, suppose an individual purchases a term insurance policy with ₹1 crore coverage for 30 years. During this tenure, if something happens to that individual, their appointed nominees receive a lump-sum payout of up to ₹1 crore.
To ensure this benefit for your family members or dependents, you must keep your chosen term insurance plan active by paying premiums on time.
Here, you may wonder how much premium you need to pay for a term insurance plan. For this, you must understand that a premium for a term insurance plan primarily depends on the amount of coverage you choose. Generally, the higher the amount of coverage you choose, the higher the premium you may need to pay.
Other crucial factors like the term you choose, your age during your policy purchase, lifestyle habits (e.g., smoking or tobacco usage or level of alcohol intake), pre-existing medical conditions, etc., also matter in determining your premium.
If you survive the policy term, your policy expires without a maturity benefit unless you opt for plans with a return of premium option.
How Does a Term Insurance Plan Work?
After understanding the meaning of term insurance, you must understand how it functions. With the help of a simple example, here is an explanation of its working from policy purchase up to the payout process.
Suppose Rahul is a 30-year-old working and non-smoking individual who decides to purchase term insurance from a reputed and leading insurer in India. Here are the steps that will unfold next in his journey:
01
Purchase of a Term Insurance Policy
Rahul chooses a term insurance plan for ₹2 crore coverage with a tenure of 30 years. He fills out the proposal form with details such as his age, lifestyle habits, pre-existing conditions and nominee information. Based on these factors, the insurer may require him to undergo a medical test before determining his premium. He then activates the policy by paying the first premium.
02
Regular Payment of Premium
Regular premium payments keep Rahul’s term insurance plan active. He chooses an annual payment frequency, though his insurer offers other options as well. Missing payments beyond the due date and grace period can lead to policy lapse. Therefore, Rahul pays his premiums on time to keep the policy active.
03
An Unfortunate Event During the Policy Tenure
Suppose Rahul, who travels daily for work, gets involved in an unfortunate event. As the sole earner, his family may face financial difficulties after losing his income. However, since he has term insurance, his nominee can file a claim with the insurer and receive the death benefit as a lump sum after verification. This payout can help his family manage daily expenses and secure their financial future.
04
Rahul Outlives His Policy Term
If Rahul survives the 30-year policy term, he will not receive a maturity benefit under a basic term insurance plan. However, if he chooses a Return of Premium (ROP) plan, the insurer may refund the premiums paid at maturity, generally excluding taxes and rider costs, as per the policy terms.
Key Features of Term Insurance Plans
Key features of term insurance typically include its affordability, the flexibility of choosing the term and sum assured, and more. Take a look at the following section and shape your decision:
A term insurance plan is a pure life insurance policy that does not include a savings or investment component. Unlike ULIPs, where part of the premium goes towards life cover and the rest towards market-linked investments, term plans focus solely on providing life cover. This makes them generally more affordable.
This type of life insurance policy provides life cover for a predetermined period, which you can choose based on your income, expenses, financial goals and other needs. You may opt for a shorter term, such as 10 years, or a longer term of up to 60 years. However, a longer policy term may result in higher premiums, depending on the insurer.
A term insurance policy also offers flexibility when it comes to the entry age. Most insurers in India allow individuals to purchase term plans from the age of 18. Starting early can help you secure life cover at a relatively lower premium, making it an affordable option for long-term financial protection.
It is a feature that some insurers provide with their term life insurance plans. Under this, a policyholder may exit their chosen term policy after completing a minimum policy duration and satisfying other conditions that their insurer has specified. Upon exiting, a policyholder receives a specified payout as per the terms and conditions of that policy with this feature.
When purchasing a term plan, the most crucial aspect is your coverage amount. This is because the coverage you choose determines the payout your nominees will receive if claimed. Insurers offer term plans with different coverage amounts. They generally introduce plans like a ₹1, ₹2, ₹3 crore term plan or even more. However, similar to a higher tenure, a higher coverage amount also increases your payable premium amount.
As you choose your preferred term for this type of life insurance and its coverage amount, another feature you may enjoy is its multiple payment options. Most insurers allow you to buy a term plan by paying the premium annually. You may also opt for monthly, quarterly or half-yearly payments depending on your budget and other factors.
The death benefit is one of the key features of term insurance, especially for those families who depend on a single earner. As regular earnings stop after the demise of that earner, earlier savings may help temporarily, but may eventually exhaust. Therefore, when you choose enough coverage for a term plan, your family receives that amount in your absence.
Riders are optional add-on benefits that get attached to your base policy and provide further coverage for other life concerns. For example, some insurers may offer a disability rider where you get financial coverage if you become partially or fully disabled due to an accident or a disease. However, adding riders generally increases your premium, which you must choose as per your budget.
Critical illness is another add-on benefit in term plans where insurers usually make a one-time lump sum payout to policyholders if they are diagnosed with a severe disease. Insurers offer critical illness riders for major concerns like terminal diseases, kidney failure, heart attack, stroke, etc. However, depending on the insurer, eligible illnesses may vary.
Term life insurance may not have a savings component, but it can still offer tax-saving benefits. Under the Income Tax Act, policyholders may claim a tax deduction on eligible premiums paid during a financial year. The death benefit received by the nominee is also exempt from tax, subject to applicable conditions.
Why Do You Need Term Insurance?
One must get term insurance to protect their family from financial distress, secure them from liabilities, reduce the impact of lifestyle-related health risks and more.
Thus, if you are the sole earner, you must anticipate such risks while financial planning and stay prepared. While you may not be able to avert all uncertainties, a life cover brings you peace of mind in the following ways:
Secure Your Family Against Financial Distress
As the primary earner, you are responsible for your family’s daily expenses and future goals. In your absence, without term insurance, their daily livelihood may get affected. With India’s retail inflation at around 4.45% in 2026, as per The Hindu, rising living costs can further strain their finances. Thus, a term insurance payout can help your dependents maintain financial stability in your absence.
Security Against Financial Liabilities
As of 2026, 74% of India’s credit-eligible population had accessed a loan at least once in the past 10 years. If you have a loan, ensure the outstanding debt does not burden your family in your absence. Long-term liabilities such as home or car loans can leave dependents with repayment obligations. A term insurance payout can help them clear these debts after your demise.
Reduce Financial Impact from Health Risks
Modern lifestyles can bring health risks that may require hospitalisation. In metro cities, hospitalisation can cost ₹5 lakh to ₹20 lakh, depending on the severity, potentially draining your savings. Critical illnesses such as cancer, heart attack, stroke, kidney failure and major organ failure can involve expensive and prolonged treatment. Adding suitable term insurance riders can provide an additional financial safety net against such uncertainties.
Death Benefit at Affordable Premium
The death benefit, or the lump sum payout that the nominee receives if something unfortunate happens to a policyholder, generally comes at an affordable premium. If you enter into a term plan at a lower age, keep your policy active or have lower health risk, you may be able to get higher coverage at an affordable rate.
Tax Exemptions
Tax exemption brings you the option to save on your taxes while paying premiums to keep your policy active. By opting for the right tax regime, you may claim up to ₹1.5 lakh as a deduction in a financial year. However, you must note the qualifying premium amount for this benefit before making a claim.
Types of Term Insurance Plans in 2026
In India, term insurance policies are available in different types, allowing you to choose a plan based on your specific needs.
While some policies offer basic life cover, others allow you to increase the sum insured periodically. Certain plans may also return the premiums you paid if you outlive the policy tenure.
For your understanding, here is a detailed breakdown of each of these plans:
Standard Term Insurance Plan
It is the simplest form of term insurance, yet the most popular among policy buyers. You purchase this plan type for a certain term (e.g. for 30 years) and get the coverage for that set tenure. Your premium amount and your chosen coverage remain constant throughout your chosen term.
Increasing Term Insurance Plan
Many insurers offer an increasing term insurance option whose increasing sum assured feature potentially helps with countering inflation. In this type, you choose a base coverage amount during its purchase. However, your coverage increases at a predetermined rate, often annually.
Decreasing Term Plan
A decreasing plan in term life insurance reduces your sum assured gradually through your chosen tenure, usually in line with your outstanding loan or mortgage amount. If you pass away while the loan is still outstanding, the payout can help your beneficiaries repay the remaining debt. Such plans generally have lower premiums than standard or increasing term plans.
Term Insurance with Return of Premium
Standard term insurance plans usually do not pay you a maturity benefit if you survive your chosen policy term. They simply expire once you outlive the tenure. However, a term insurance with Return of Premium (TROP) allows you a return as you outlive your chosen term. It essentially returns all the premium payments that you have made throughout your tenure.
Convertible Term Insurance
Many policyholders often wonder if they can convert their term insurance into a traditional life insurance policy. For this, you do not have to purchase a separate life insurance policy, as a convertible plan allows you to convert your existing term plan to life insurance during its tenure. Depending on the insurer's conditions, you may not need to go for another medical examination during this conversion.
NRI Term Insurance
If you are someone who resides outside India and has a Non-Resident Indian (NRI) status and want to ensure financial protection for your eligible family members in India, an NRI term plan may suit you. Many insurers in India offer such an option for NRIs, ensuring peace of mind by covering eligible family members in India.
Group Term Insurance
As the name implies, this plan allows you to cover a group of people under only one term plan. Rather than individuals, this type of plan is suitable for employers who cover their employees under one umbrella plan, instead of buying separate plans for employees. This helps them to save on costs or expenses while ensuring financial safety.
Yearly Renewable Term Insurance
An Annual or Yearly Renewable Term Insurance (ART or YRT) plan provides life cover for one year at a time. You can renew it every year, with the premium typically increasing as you get older. It can be suitable if you want flexible, short-term coverage without committing to a long policy tenure.
Joint Life Term Insurance
A joint term life insurance policy provides life cover to two people, usually spouses, under a single plan. It generally works on a first-to-die or second-to-die basis. In the first-to-die option, the death benefit is paid when one policyholder dies. In the second-to-die option, the policy continues after the first death, with the benefit paid after both policyholders pass away.
Saral Jeevan Bima
As per the Insurance Regulatory and Development Authority (IRDAI) mandate, Saral Jeevan Bima is a term insurance policy standardised across all life insurers. This plan is available to individuals aged between 18 and 65 years and offers a coverage amount ranging from ₹5 lakh to ₹25 lakh. First-time buyers who are looking for cost-effective coverage can apply for this plan.
What is Covered and Not Covered in Term Insurance?
A term insurance policy generally provides financial protection to your nominee if you pass away during the policy term. However, certain situations may be excluded or subject to specific policy conditions.
Knowing these inclusions and exclusions can help you understand when your policy is likely to provide a death benefit:
Covered
Death due to natural causes
Death resulting from covered illnesses or medical conditions
Death caused by accidents, including road or workplace accidents
Not Covered
Suicide within the 1st year
Non-disclosure or misrepresentation of pre-existing illnesses
Death due to illegal activities
Death resulting from an accident while under the influence of alcohol or drugs
Death related to pregnancy or childbirth
Who Should Buy Term Insurance?
Individuals who have family members who financially depend on them, those who are sole earners, newly married couples, parents, etc., should consider term insurance. Here are some common profiles and their insurance needs to help you understand whether it is right for you:
While you are young and working, purchasing term insurance can offer additional advantages. As people generally stay healthier at this age (e.g. in their 20s or 30s) and financial responsibilities also stay low, it helps to secure a plan at an affordable price. While an individual in their 40s may have mortality risks, increasing their premium amount.
If you are the primary or sole earner, term insurance can help protect your family from a sudden loss of income. Ideally, you should choose a life cover of 10 to 15 times your annual income. For example, if you earn ₹7 lakh annually, a ₹1 crore cover (15 times your annual income) is a suitable benchmark.
If you are a working woman and have financially dependent family members, securing term insurance is equally crucial for you. It ensures that your dependents do not face financial struggle in your absence. Also, as women tend to live longer than men, insurers may offer a lower premium, allowing savings and coverage at the same time.
As a housewife, your contribution to household functions is of utmost importance. Securing a term plan for housewives ensures coverage for child care and other household expenses. However, such policies usually depend on the income of their spouse. Also, they must meet the insurer’s criteria to get a term insurance dedicated for housewives.
If you are the primary or sole earner, term insurance can help protect your family from a sudden loss of income. Ideally, you should choose a life cover of 10 to 15 times your annual income. For example, if you earn ₹7 lakh annually, a ₹1 crore cover (15 times your annual income) is a suitable benchmark.
Retirees or senior citizens may have to purchase term insurance with a higher premium, but it has its own benefits. Such term policies ensure coverage for dependent spouses, eligible children or other family members in their absence. Individuals with plans to leave a legacy may opt for a term plan that provides a tax-free payout under covered events.
When starting a family, relocating or managing major expenses, you may take loans to meet your financial needs. However, with interest rates ranging from 7.25% to 10%, these loans can become a significant financial burden. During an unfortunate event, the outstanding debt may fall on their dependents. A term insurance payout can help settle the debt.
A salaried individual may have the benefit of group insurance, provident funds, gratuity, and others to secure their families and post-retirement life. However, a self-employed individual does not have such benefits. An unfortunate event here puts such a liability on surviving members. Aside from the loss of income, it may disrupt their business continuity.
Paying premiums for a term insurance plan can also support your tax planning. Under Section 123 of the Income Tax Act, 2025, premiums of up to ₹1.5 lakh may qualify for deductions, helping reduce your taxable income. Additionally, death benefits from a term insurance policy are exempt under Section 11, subject to applicable conditions.
Term Insurance Based on Different Life Stages
As you age, your financial responsibilities evolve, and so does the need for coverage from a term plan. From kicking off your career, getting married, having children, buying a house and retirement planning are some important milestones.
Having a term plan with enough coverage helps to ensure that your family maintain a standard of living in your absence:
Term Insurance in 20s
At this age, as you initiate your career as a professional or as a self-employed person, your financial responsibilities generally remain low. Aside from this, since health risks are generally lower at this point, insurers consider it relatively safer and offer coverage at lower premiums. This age can be an excellent starting point for securing, say, a 30-year term plan.
Term Insurance in 30s
In your 30s, your financial responsibilities increase. This is because at this stage people generally plan for their marriage or get married, plan for family expansion, purchase a house or take on other financial commitments. If you maintain your overall health, a term plan may still be affordable at this point.
Term Insurance in 40s
At the age of 40, especially in India, people generally become prone to heart attacks, hypertension, kidney issues and more. This generally happens due to lifestyle imbalances that most of the population may not be able to manage due to increased loads at the workplace and other responsibilities. This life stage is riskier, and therefore purchasing term insurance at this age may come with a higher premium.
Term Insurance Policy in 50s or Above
Insurers in India generally set an upper limit on entry age. It is generally 65 years. Due to a higher age, the premium may be higher for term plans at this age. At this age, you may not be able to secure coverage for the long term, such as for 30 years or more. However, securing a cover for 15 years is still meaningful if you have dependents like your ageing spouse, other eligible dependents or remaining liabilities.
How to Choose the Best Term Plan for youself?
Securing your family’s financial future requires evaluating your financial needs, term insurance benefits, available riders and other key factors. Let us take a look at the same:
Assess Financial Requirements
The initial and one of the crucial steps in choosing the best term plan is to assess the financial requirements of you and your family. For this, you must factor in your current standard of living and expenses. You must also assess the healthcare requirements of your dependents, education expenses of your children, etc., and estimate a coverage amount.
Determine Your Policy Tenure
When choosing term insurance, consider your age, income and its stability to select a suitable policy tenure. A tenure that aligns with your earning years can help you maintain the policy without interruptions. For instance, if you are 30 years old with a stable income, you may opt for a tenure of 30 years. This way, you may be able to maintain financial protection throughout your key earning years.
Compare and Choose Riders
To increase the scope of your base coverage, you must also consider and compare riders. Adding riders such as accidental death, critical illness and disability cover can provide extra protection. They cover specific risks that the standard policy may not include. However, choose only the riders you actually need. Unnecessary riders can increase your premium without adding much value.
Look for the Grace Period
Missing term insurance premiums beyond the due date may cause your policy to lapse, leaving your family financially vulnerable. However, insurers generally offer a grace period to make the payment and keep the policy active. As per IRDAI, the grace period is 15 days for monthly premiums and 30 days for quarterly, half-yearly or annual premiums. However, before purchasing, you must inquire about the exact grace period.
Consider the Free Look Back Period
If you are not satisfied with your term insurance plan, you can cancel it during the free-look period and choose another policy. As per IRDAI guidelines, insurers generally offer a 30-day free-look period from the date of a policy purchase. If you cancel within this period, the insurer refunds the premium paid, subject to applicable deductions and terms. Therefore, check the free-look period during term insurance comparisons.
Assess Customer Experience
Aside from financial metrics, reviews by existing policyholders or customers also matter when understanding the reliability of an insurer. Whether it is the policy purchase experience, policy servicing or claim settlement, you may check what customers of specific insurers are saying about them. Consistent support throughout a policy tenure is another aspect to consider.
Understand the Claim Settlement Ratio
A claim settlement ratio (CSR) of an insurer represents the percentage of claims an insurer settles throughout a given period. A higher CSR can indicate a stronger track record of settling claims. When comparing insurers, checking this ratio can help you assess the insurer’s claim settlement record and the likelihood of your nominees receiving the policy benefit after a valid claim.
Look for the Solvency Ratio
Aside from CSR, a solvency ratio is more of a financial metric that indicates the capability of an insurer to meet its financial obligations upon claim. A good solvency ratio, therefore, is an indicator that an insurer has enough capital in reserve to honour a claim and complete its payout accordingly.
Select the Right Payout Option
While choosing the best term insurance plan, check the payout options available under the policy. You may choose for your nominee to receive the death benefit as a lump sum, regular income, a combination of both or increasing monthly income, depending on the insurer. If your family relies on your income, a regular payout can help them manage their monthly expenses after your demise.
Review the Smart Exit Benefit
Some insurers offer a Smart Exit Benefit, which allows you to leave the policy after a specific period. Depending on the policy terms, you may receive a partial or full refund of the premiums paid. This feature can be useful if you want more flexibility with a long-term policy. Thus, check the eligibility rules, exit period and other applicable conditions before prioritising a term plan.
How Much Term Insurance Do You Need?
As you compare insurers and insurance policies, you must ensure coverage that can efficiently cover immediate and future expenses of your dependents in your absence. The following are some approaches to estimate your coverage amount when purchasing a term plan:
If you are the sole earner, your family may face a significant financial gap if your income suddenly stops. Income replacement helps bridge this gap through the term insurance payout. A common recommendation is to choose a cover of 10–15 times your annual income. For example, if you earn ₹12 lakh annually, a 10x cover would amount to ₹1.2 crore.
To arrive at a potential ideal coverage, you must consider adding up all your outstanding long- and short-term liabilities. These liabilities can be personal, home, car, educational loans and others. Before deciding on a coverage amount, ensure that the sum assured is enough to cover these liabilities. For instance, if your total liabilities amount to ₹30 lakh, consider a sum assured of at least ₹30 lakh or higher to help your family repay these debts.
In this estimation, you consider 4 essential financial responsibilities. These are Debt, Income, Mortgage, and Education (D.I.M.E). Here, you add up your existing debts and mortgages, your children’s educational expenses, and your salary for the required protection period. For example, suppose an individual has a debt of ₹10 lakh and a home loan of ₹1 crore.
Example of D.I.M.E Calculation:
The estimated educational expenses are ₹50 lakh. He earns 20 lakh P.A, and he estimates the financial protection his family needs for the next 10 years. Estimated life cover as per D.I.M.E approach is ₹10 lakh + ₹1 crore + ₹50 lakh + (₹20 lakh × 10) = ₹3.6 crore.
Understanding Term Insurance Coverage with Examples
Your term insurance needs can change as your income, responsibilities and financial goals evolve. The following examples show how different life stages and financial situations can affect the coverage you may need:
Age
Approximate Life Coverage Requirement
20 to 30 years
25 times your annual income
30 to 40 years
20 times your income per annum
40 to 50 years
15 times the amount earned in a year
50 to 60 years
10 times your annual income
Choose the Right Term Life Insurance Duration
While choosing the right policy duration or tenure, you must aim to ensure that the duration is enough to cover existing and future financial responsibilities. As you factor in your age, future financial expenditures, your children’s educational needs, liabilities, etc., during coverage estimation, you must consider those factors as well.
Your Situation
Suitable Tenure Consideration
In your 20s or 30s
You may have several working years ahead, so a longer tenure can provide coverage for a larger part of your earning years.
In your 40s or 50s
A shorter tenure may be suitable, provided it covers your remaining financial commitments and dependants’ needs.
Have Long-Term Debt
Choose a tenure that lasts long enough to cover your financial obligations, such as a home loan with a longer repayment period.
Planning for Retirement
If you plan to retire at 60, you may consider coverage that continues until your planned retirement age.
Concerned About Premiums
Longer tenures may come with higher premiums. Avoid choosing an unnecessarily long tenure if the premium becomes difficult to afford.
In term insurance, riders are optional add-ons which help boost your basic insurance coverage and offer additional protection. While purchasing a term plan, considering riders is important as you ensure that you are not just covering the basics but safeguarding against other potential adverse or uncertain life incidents.
Riders generally differ between one insurer and another. Therefore, you must compare term insurance plans from different insurance providers and opt for riders accordingly.
However, similar to choosing higher coverage or a tenure, you must also keep affordability in mind. As riders provide additional benefits, you must pay for them separately alongside your base premium. Hence, understand the maximum amount you can bear in terms of premium and include riders that you feel you may need instead of including them unnecessarily.
Types of Riders in a Term Insurance Plan
For a clear picture of what are some common types of riders in term insurance, take a look at their description and choose wisely when purchasing a plan:
Accidental Death Rider
This rider generally provides an additional payout alongside a lump sum payment upon claim of a term insurance if a policyholder passes away due to an accident. It can be an ideal choice for individuals whose job roles require travel by road or who are engaged in high-risk jobs.
Critical Illness Rider
Policyholders who include this rider get a lump sum payout if they are diagnosed with a covered ailment. These include terminal diseases, kidney failure, stroke, heart attack, major organ failure, etc.
Waiver of Premium
As its name implies, this rider waives the premium of a policyholder if they become disabled and lose income due to an injury or an illness. This allows the policy and its coverage to remain active without further premium payments. Without this rider, missing premiums could cause the basic policy to lapse.
Income Benefit Rider
This rider helps your dependents with financial benefits in case something happens to you and your regular income stops. If you add this with your term insurance, your family gets a regular income, instead of or alongside the sum assured amount. This payment is generally for a specified time, and you must enquire about it before choosing it.
Hospicare Benefit Rider
The Hospicare Benefit Rider provides a fixed cash amount for each day you are hospitalised. The payout is not linked to your actual hospital bills, so you can use it for additional expenses such as travel, food or income loss during your hospital stay.
Live Well Rider
This rider combines financial protection with wellness benefits. Along with a death benefit, it may cover services such as OPD consultations, preventive health check-ups and other wellness services, as per the policy terms.
While you compare term insurance from leading insurers, do not forget to consider riders as per your requirements. With Pluto, you can explore policies with relevant riders and compare the additional protection they offer before finalising your plan.
Factors That Affect Term Life Insurance Premiums
When you purchase term insurance, you must also prioritise premiums since they are tied to your budget. Consider the following factors as they have an impact on the pricing of your policy premiums:
A younger individual (in their 20s or 30s) may enjoy a lower premium for a certain coverage compared to an older individual (in their 40s). This is because younger people generally have lower health risks in comparison to older people. Also, women tend to live longer than men. Therefore, women often pay lower premiums (often around 15%) than men.
Individuals who maintain a sedentary lifestyle may face a higher premium amount when purchasing term life insurance. Their lack of physical activity may lead to increased cholesterol levels and obesity. Maintaining a healthier lifestyle reduces the risk of disease and may lower premiums.
Regular habits like excessive smoking or drinking increase health risks and therefore, insurers may impose a higher premium. For example, a regular smoker may end up paying 50% more or even higher premiums. Similarly, if an individual's alcohol intake crosses permissible limits, insurers may charge a higher premium to cover higher health risks.
While purchasing term insurance, you need to share your health conditions and your family's medical history. If medical conditions like kidney diseases or cardiac issues run in your family, it may increase your policy premium, depending on the insurer’s terms.
Your profession can also affect your term insurance premium. Insurers may charge higher premiums for high-risk jobs such as pilots, defence personnel, firefighters, miners and chemical plant workers, as these occupations involve greater risks to life.
The more coverage you choose, the higher the payout amount for your chosen nominee in case of an unfortunate event. However, higher coverage generally leads to a higher premium. For example, a term insurance with ₹3 crore coverage may incur a higher premium compared to a ₹1 crore coverage, keeping other factors constant.
A higher tenure means you keep paying for your chosen plan for a longer duration. With time, it increases your overall premium expenses. Suppose you choose a 20-year term instead of a 10-year policy. Here, your annual premium may drop, but paying that lower rate for twice as long raises your total lifetime cost.
Riders provide additional financial protection alongside your term insurance policy. Their cost is added to the base premium, which may increase your overall premium slightly. However, choosing relevant riders can help you manage the financial impact of specific covered events.
Wondering which term insurance is best in India? Skip the endless policy search with Pluto. Get term insurance quotes now!
Claim Settlement Process in Term Insurance
Understand the claim settlement process of your term insurance plan at the time of purchase and keep your nominees informed. This will help them file the claim smoothly and receive the policy benefits when needed.
1
In case of an unfortunate event, your chosen nominee must approach your insurer. They can do it by visiting their official website or dedicated mobile app. A nominee may claim by visiting a physical branch, if available.
For hassle-free claim support, you can always trust Pluto! Our claim assistance experts are available 24/7.
2
Your nominee must obtain a claim form online and fill it out with the necessary details. They must upload it with supporting documents like the policy details, death certificate, etc. For an offline process, they can get the form from an appointed official at the insurer's office and follow a similar process.
3
Your insurer will then review that claim form and the submitted documents for eligibility. In case they require further documentation, they generally reach out and ask for it. Upon successful verification, your insurer then settles the claim amount as per the policy’s terms and conditions.
Documents Required for Term Insurance Claim
In the realm of term insurance, required documents generally differ depending on the event that resulted in the demise of a policyholder. Here are some documents you must note that insurers generally ask for in case of an untimely natural and accidental death:
Natural Demise
✓
In case of a natural demise of a policyholder, their beneficiaries or nominees must produce these documents:
Duly filled out original claim form
Nominees must submit their proof of identity and relationship with the policyholder
Produce the original term insurance policy documents
Provide the medical report for cases of demise due to an illness
Original death certificate
Produce a discharge summary from the hospital for a demise due to an ailment.
Accidental Demise
✓
In sensitive cases where a policyholder passes away due to a fatal accident, their nominees must produce these documents:
A properly filled claim form
A First Information Report (FIR) copy obtained from the police
A copy of the post-mortem report
Produce the original death certificate copy
Provide a copy of the statement from the attending doctor
Certificate of attendance in medical terms
How Does Term Life Insurance Payout Work?
After you submit a term insurance claim, the insurer verifies the claim and the submitted documents before processing the payout. Understanding these steps can help you know what happens after claim submission and when your nominee can expect to receive the policy benefit.
Investigation and Verification
Once your appointed nominee submits a claim form, your insurer carries out a thorough verification. They go through the details of the claim form, submit documents and align them with your policy. They may include an investigation to confirm the authenticity of a claim. Depending on the complexity of an incident and policy terms, it may take a few days.
Claim Processing
Upon successful verification and investigation, your insurance company processes the claim. As per the IRDAI, insurers must process or settle claims within 15 days of claim intimation. However, if a further investigation is needed, your insurer must accept or reject a claim within 45 days of initial intimation.
Approval and Payout
As your insurer processes the claim, your nominee receives the payment in a lump sum or by other means as mentioned in your policy. If any documents are missing or discrepancies are found, the insurer may request additional information. Once these are resolved, the payout is released as per the policy terms.
Types of Payout Options in Term Insurance
Term insurance plans in India offer different payout options to help your family manage their finances after your demise. Let’s look at the 4 common payout options available:
Lumpsum Payout
The lump-sum payout option is the most common form of term insurance payout. Under this option, the nominee receives the entire death benefit as a single payment. It may be suitable if your beneficiaries can manage a large amount on their own or need a substantial sum for a major expense at a time.
Monthly Payout
Under the regular payout option, the nominee receives the death benefit through fixed payments over a chosen period instead of getting the full amount at once. For example, if the death benefit is ₹1.2 crore and the payout period is 10 years, the amount may be divided into 120 monthly payments of ₹1 lakh each, subject to the policy terms.
Lumpsum with Monthly Payout
The lump sum with monthly payout option combines the two methods mentioned above. The nominee receives part of the death benefit immediately and the rest through regular payments over a fixed period. For example, if the death benefit is ₹1.5 crore, the nominee may receive ₹75 lakh as a lump sum and the remaining ₹75 lakh through monthly payments of ₹1.25 lakh over 5 years.
Increasing Income Payout
This payout option provides a regular monthly income that increases by a fixed percentage or amount every year. It can help your family manage rising living costs over time. For example, if the nominee receives a monthly payout of ₹50,000 in the first year and it increases by 10% every year, they would receive ₹55,000 per month in the second year and ₹60,500 per month in the third year.
How Does Taxation Work in Term Insurance Policies?
Although a standard term insurance does not have a savings component, you can save on taxes under specified sections of the Indian Income Tax Act. Under Section 123 (previously Section 80C), you can claim up to ₹1.5 lakh for the premiums you paid.
However, your premiums must not exceed 10% of the sum assured of your policy bought after April 1, 2012. If you have purchased a term plan before this date, your premiums must not exceed 20% of your sum assured.
Under Section 11, Schedule 2 of the Income Tax Act 2025 (previously Section 10(10D)), the death benefit that your family receives remains completely tax-free.
Term Insurance Claim Rejection Reasons & Solutions
Aside from understanding term insurance, its benefits, claim process and other components in detail, you must also stay aware of claim rejection scenarios. Noting them helps prevent your nominees from facing last-minute surprises:
Undisclosed Information
Fully disclose all the information, such as your current medical condition, lifestyle habits, occupational hazards, and details of any existing policy and other required information to your insurer. Undisclosed information may lead to a rejection if detected during a claim.
Ignoring Policy Exclusions
Understand the exclusions in detail by thoroughly going through the respective brochure before purchase. Purchasing a policy unaware of exclusions can lead to a rejection, as insurers do not cover conditions mentioned in it.
Incorrect Nominee Details
Carefully appoint the nominee who you decide to receive the death benefit. Provide their accurate personal details, contact number and relationship with them.
Policy Lapse Due to Missed Premiums
Keep your policy active throughout your chosen term. Missing premiums, even after a grace period, may lead to a policy lapse and hence a rejection.
Delayed Claim Intimation
Your nominee must inform the insurer about a covered incident immediately. Insurers generally allow a timeframe for this, which they must look for in policy documents or brochures for the applicable period.
Planning for the unexpected starts with the right protection. Explore the top leading options and choose one today!
Frequently Asked Questions (FAQs)
Are term insurance riders too expensive?
Riders available with insurers are mostly affordable. However, as they provide added protection, choosing them increases the scope of your base policy and may slightly increase your overall costs for a policy.
Can I add a minor as a nominee in a term plan?
Yes, you may add a minor as a nominee in a term plan. However, you must mention the name and relationship of their legal guardian, as minors cannot legally file a claim on their own.
Is there any minimum income requirement to get a term plan?
No, generally insurers do not mention any income requirement while purchasing such a plan. However, to get proper coverage, you may need to produce a bank statement or salary slip and purchase one.
What are the benefits of riders covering permanent and partial disability?
As unexpected events may lead to a permanent or partial disability, such riders protect your finances. Depending on their terms, these riders may provide coverage for loss of income. Some may waive the premium while keeping your policy active.
Which incidents come under exclusion of the best term life insurance plan in India?
Term insurance covers incidents like an untimely demise due to covered illness, accident or natural causes. However, insurers pay for claims if such incidents happen during the policy term.
Which types of incidents does term insurance cover?
Term insurance covers incidents like an untimely demise due to covered illness, accident or natural causes. However, insurers pay for claims if such incidents happen during the policy term.
