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A Ultimate Guide to Buy Term Life Insurance Plan

An insurance policy is the best way to have monetary assurance for the future, and the reason why people consider buying term life insurance. Several types of plans and policies are available on the market, of which the term insurance policy is the most basic and traditional one there is.

Life insurance is a contractual agreement between an individual and an insurance company for a certain period, the policyholder pays a premium, and the insurer pays the beneficiary a solid amount at the end of the term.

What is Term Life Insurance?

This insurance plan only offers risk coverage and protection through a death benefit. Several plans are available that provide an additional savings system.

A basic plan will not have the option of maturity or survival benefits if the policyholder outlives the term. But there are premium plans and Term Return of Premium plans (TROPs) available, which will refund the policyholder, the invested amount, or offer a maturity benefit, all the more reason to buy a term insurance plan.

Term insurance plans have lower premiums compared to other insurance plans, and the reason is that it doesn’t come with an investment option.

Furthermore, some term plans can be bought without having to go through a medical examination. If the applicant is younger and leads a healthy lifestyle, he/she can buy a plan without requiring a medical exam.

Types of Term Insurance Plans in India

These are the various types of term insurance plans available in India. They are:

Level Term Plan

  • The most basic plan
  • The assured sum will be paid to the beneficiary by the insurance company, upon the death of the policyholder

Monthly Income Plans

  • Generally, the insurers will only pay a death benefit to the nominee, but some plans allow a monthly payout to the beneficiaries which is of greater convenience to some individuals

Return of Premium Plans

  • Such plans allow the insured to get a refund of the paid premiums or a maturity benefit, if they outlive the insured term

Increasing or Decreasing Term Plans

  • In such plans, the sum assured will be increased or decreased by a particular percentage, every year.

How to Buy a Term Plan?

A term plan can be bought either online or offline. Generally, buying an insurance plan online is cheaper than buying it offline, or through an agent.

Before buying a plan, the following things need to be done:

  • Firstly, calculate the life cover that would be required
  • Secondly, a quick survey of all the available market plans is a must, to narrow down the search to a plan that would suit your individual needs. This can be done easily through certain aggregator websites which will allow for a comparison between plans
  • On any insurance website, an option to get a quotation will be available. Click on that and enter the necessary details to get an approximate quote

Features Term Life Insurance Plan

Typical features of a term life plan:

  • Entry Age: Minimum-18 years, Maximum-65 years
  • Maturity Age: Maximum- 75-80 years, depending on the insurance provider
  • Sum Assured: This is the total amount that will be paid to the beneficiaries, after the death of the policyholder
  • Term/ tenure: This is the period for which the policyholder has life cover

Minimum term period- 10 years

  • Most importantly, a term plan can financially help the beneficiaries in case of the policyholder’s death. For instance, payment of debts owed, payment of a mortgage, or children’s education fund Many insurance companies offer bonuses and benefits, depending on the term and the insurer 
  • The most important reason to buy a term life insurance is that the death benefits the nominee would receive will be completely tax-free
  • It is a good option if the policyholder just requires coverage until the children become financially independent
  • Many insurance companies are offering COVID-19 coverage, under the current circumstances

Comparison of Life Insurance Plans

A comparison of the various types of life insurance plans available:


Plans Term plan Whole life insurance Endowment plan ULIPs (Unit Linked Insurance Plan) Money-back plan
Tenure 10-40years 20 years (of premium payment) 30 years 20 years 20 years
Assured Sum Up to Rs.1Crore Rs.3 Lakh Rs.10 lakh Rs.2 lakh Rs.5 Lakh
Premium Range Rs.6800- Rs.10,500 p.a Rs.10,000- Rs.15,000 p.a Rs.20,000- Rs.25,000 p.a Rs.20,000 Rs.20,000- Rs.25,000
Upon completion of term Premium not paid back   Payback options available with certain companies Survival benefits offered -Assured sum +profits -Assured sum +profits -Assured sum +profits
Bonuses None Yes Yes Yes Yes
Added benefits Available Available Available Available Available
Payout Death benefit   Monthly payout (some plans) -Partial withdrawals -Maturity benefits -Maturity benefits -Maturity benefits -Survival benefits -Maturity benefits
Savings/investment N/A Yes Yes With risk investment Yes
Simplicity Best More complex More complex Most complex Fair

Things to Consider While Buying Term Insurance

The basics to keep in mind with term insurance are:

  • Always buy from a reputed insurance provider
  • Always check an insurance agent or broker’s credentials before opting to buy through them
  • Read the brochure thoroughly and compare different policies and companies, to make an informed decision
  • Never withhold or try to cover-up any health-related information from the insurance provider
  • Always go through these key features, before making a decision:
  • Medical exam: Some companies may not require a medical examination, provided the applicant is of good health, relatively younger age and follows good lifestyle practices
  • Coverage term: Always opt only for the required amount of life cover because once the term gets over, a refund of premiums will not be made, under regular plan
  • Claim Settlement Ratio: Always go for an insurer that provides a higher claim settlement ratio. A claim settlement ratio is the percentage of insurance claims that that company has settled with its policyholders

  • Added benefits/Riders: These are certain additional benefits offered by the insurer. The following common riders are available:
    • Accidental death benefit
    • Accelerated death benefit
    • Premium waiver
    • Surgical rider
    • Term rider
    • Hospital cash rider
    • Critical illness rider
  • Payout options: Whether only a lump sum death benefit is applicable or a monthly payout option is possible 

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