What is Term Insurance? Complete Guide & Calculator (2025)
Your step-by-step guide to understanding and choosing the right term insurance in India, with a coverage calculator.
What is Term Insurance?
Term insurance is a pure life insurance policy that provides financial protection to your family in case of your untimely demise during the policy period. It promises a high sum assured at an affordable premium, with no maturity value if you survive the term. Its purpose is simple: to ensure your loved ones are financially secure even in your absence.
- Pure risk cover: No investment or savings component; only a death benefit.
- Lowest premium: Among all life insurance plans for a given coverage.
- Flexible tenure: From 5 years to 40 years or more.
- Riders: Add-on benefits like critical illness, accidental death, waiver of premium.
Types of Term Insurance Plans
- Level Term Plan: Fixed sum assured and premium throughout the policy.
- Increasing Term Plan: Sum assured rises yearly (handy for inflation).
- Decreasing Term Plan: Coverage reduces annually; ideal for covering reducing loans like home loans.
- Return of Premium (TROP): Get your total premium back if you survive the policy term. Premiums are higher than pure term.
- Convertible Plans: Can convert to other life insurance (e.g., endowment) without new medicals.
Who Should Buy Term Insurance and Why?
- Anyone with financial dependents: Parents, spouses, or children relying on your income.
- Young professionals: Lock in lower premiums early; future-proofs family finances.
- Primary earners: Your absence shouldn’t disrupt your family’s standard of living or long-term goals.
- Home or personal loan takers: Ensure your debts don’t pass on to your loved ones.
- Self-employed and business owners: Irregular income? Safeguard family against business risks.
- People seeking tax benefits: Section 80C tax deductions on premiums and tax-free death benefit (Section 10(10D)).
Summary: Term insurance is a must-have for anyone with family responsibilities, regardless of occupation or income level.
Will You Get Money Back in Term Insurance?
Traditional Term Insurance: No. If you survive the policy term, you do not get any money back. The low-cost structure is possible because the insurer only pays in case of unfortunate events, not on survival.
Return of Premium Plans (TROP): Yes. If you opt for TROP, all base premiums paid (excluding taxes and riders) are refunded if you survive. However, these plans cost more than traditional pure term plans.
Top Reliable Term Insurance Plans in India (2025)
| Plan | Company | Key Features | Claim Settlement Ratio |
|---|---|---|---|
| Click 2 Protect Super | HDFC Life | Whole life, flexible payout, TROP option | 99.5% |
| iProtect Smart | ICICI Prudential | Lump sum or monthly payout, critical illness | 99.1% |
| Sampoorna Raksha Supreme | Tata AIA | Joint life, special premium rates for women | 99.4% |
| eShield Next | SBI Life | Increasing cover, multiple payout choices | 98.8% |
| POS e-Term Plan | Max Life | Simple, affordable, easy online purchase | 99.3% |
Always compare features, claim settlement ratios, premium quotes, and available riders before buying!
Benefits of Term Insurance
- Financial safety for family’s lifestyle and goals.
- Highest coverage at lowest premium.
- Simple to understand and buy.
- Tax benefits under section 80C and 10(10D).
- Flexible options and extra covers for critical illness, accidents, and waiver of premium.
Term Insurance Sum Assured Calculator
Calculate Your Required Term Insurance Cover
This formula considers your family’s yearly needs over a certain period, liabilities, and subtracts your existing investments.
Frequently Asked Questions (FAQs)
What is term insurance?
Term insurance is a pure life insurance policy that pays a lump sum to your family if something happens to you during the policy period. No maturity returns if you survive.
Who should buy term insurance?
Anyone with dependents or liabilities should buy term insurance — including employees, self-employed, business owners, and loan holders.
Will I get my money back if I survive?
Pure term: No money back. TROP: All premiums (excluding taxes, charges) returned if you survive the full term.
How much sum insured should I take?
For most, it should be 15-20 times your annual income plus your loans and future goals, minus your existing assets. Try the calculator above!
Is term insurance tax-free?
Premiums are tax deductible under Section 80C, and the death benefit is tax-free under Section 10(10D) (as per prevailing laws).
Conclusion
Term insurance is the simplest and most cost-effective way to guarantee your family’s financial well-being in your absence. With rising expenses and uncertainties, delaying it can cost you in premium and peace of mind. Compare features, use the sum insured calculator, and choose a reputed insurer with a strong claim settlement record for 2025.
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