What is Term Insurance Plan?

Term insurance is the simplest form of life insurance policy that offers financial security to your family in case of your unfortunate death during the policy tenure. You can choose a high sum assured for your term life insurance plan at affordable premiums. For example, you can buy a 1 crore term insurance policy starting at just Rs 20-/ per day.

Buying term insurance at a young age (especially in your 20s) offers the benefits of nominal premiums. Before buying a term life insurance policy you must understand its features, benefits, and factors to consider before buying.

Types of Term Insurance

There are different types of term insurance plans each offering unique benefits to the policyholders. You can choose the one that best suits your needs.

1. Pure or Level Term Insurance

   Pure term insurance offers financial coverage of the fixed sum assured during the policy tenure. The sum assured or life cover does not change during the entire policy tenure. The premiums amount for a level term insurance policy also remains constant or fixed.

2. Increasing Term Insurance

   In an increasing term plan, your sum assured amount increases during the policy tenure. This plan helps to adjust the increasing inflation with an increasing life cover. The premiums for an increasing term insurance plan are higher as compared to pure term insurance.

3. Decreasing Term Insurance

   In a decreasing term insurance policy, the life coverage or sum assured decreases during the policy tenure. If you are certain that your financial obligations will decline in the future, then a decreasing-term insurance policy is an ideal choice for you. The premiums remain constant during the policy tenure.

4. Term Insurance with Return of Premium (TROP)

   In this plan, the premiums paid are returned if you survive the policy tenure. The premiums of TROP plans are higher as compared to a pure term insurance plan.

5. Convertible Term Insurance

   Convertible term insurance offers you the option to convert your term plan into another form of life insurance (such as a whole life policy or endowment plan) in the future. Human needs are evolving with time and this plan can help you fulfil your evolving needs.

Before buying any term insurance plan you must understand your financial goals and future needs to make the right decision. Term insurance is a long-term commitment. So you must make your buying decision wisely.

How Does a Term Life Insurance Policy Work?

Term life insurance provides the chosen sum assured to your family in case of your unfortunate demise during the policy tenure. You can choose a policy tenure of 10, 20, or 30 years as per your choice. The insurance company calculates your premiums based on various factors including age, health conditions, sum assured amount, lifestyle habits, etc.

Let’s understand how a term insurance plan works with a simple illustration to give you more clarity.

Features of Term Life Insurance

Here are some of the features of a term insurance policy for your better understanding:

1. Simple and affordable

   Term insurance is one of the simplest and most affordable forms of life insurance that gives you a larger life cover at affordable premiums.

2. Free-look period

   A term insurance plan offers a 30-day free look that allows you to cancel your policy in case you are not satisfied with the same without paying any charges.

3. Choice of policy tenure

   You can choose a policy tenure for your term insurance plan as per your requirements. Choosing the right policy tenure helps you fulfill your financial needs. The policy tenure starts from 5 years and goes up to whole life.

4. Flexible premium payment options

   You can choose your premium payment options as per your choice. There are various premium payment options including lump sum, annually, half-yearly, quarterly, and monthly.

5. Additional riders

   You can also enhance your coverage of your term plan with additional riders. There are various add-ons available to choose from including accidental disability rider, waiver of premium rider, critical illness rider, etc.

6. Multiple payout options

   At the time of term insurance purchase, you must choose a payout option. The chosen payout option determines the frequency of sum assured payment to your loved ones in case of your death. You can choose from various payout options including lump sum, yearly, half-yearly, etc.

Benefits of Term Life Insurance

Various benefits of term insurance make it an ideal choice for an individual. Let’s understand these benefits in detail:

1. Financial security for your family

   A term plan offers financial protection to your loved ones in case of your unfortunate death during the policy tenure. It helps your family fulfill their financial goals and live a comfortable life.

2. Income substitute

   Term insurance policy is an income substitute for your loved ones in case you are the sole breadwinner of your family. It is the best gift you can give to your family.

3. Tax benefits

   You can avail of tax benefits on your term insurance premiums under Section 80 (C) and Section 10 (10D) of the Income Tax Act, of 1961.

4. Nominal premiums

   You can buy a term insurance plan with higher life coverage at affordable premiums. The term insurance premiums start at just Rs 400 for a 1 crore life cover.

5. Easy to understand

   Term insurance is one the easiest type of life insurance policy as there is no investment component involved. Your family will receive the death benefits in case of your demise during the policy tenure.

Who Should Buy a Term Life Insurance?

Ideally, everyone should consider buying a term insurance plan. But there are some categories of individuals who can’t afford to miss out on buying a term plan.

1. Young professionals

   If you are in your 20s and just started earning you should ideally invest in a term life policy to make sure that your loved ones are financially safe even in your absence.

2. Only breadwinner

   If you are the sole breadwinner of the family you must consider investing in a term plan. To make sure that your loved ones do not struggle to meet their ends.

3. Parents

   Parents are the ones who offer financial and emotional support to their children till they mature. A term plan ensures that your child’s future is financially secure even if you are not with him.

4. Newly married couple

   A newly married couple must invest in a term insurance policy as it can safeguard their future financially. There are various joint life insurance plans available in the market that cover couples under a single policy.

5. Self-employed

   You must buy a term policy if you are a self-employed individual to make sure that your loved ones do not struggle financially in your absence.

6. Taxpayers

   Taxpayers must ideally invest in a term insurance policy as term insurance offers tax benefits of up to Rs 1.5 lakhs under Section 80 (C) and Section 10 (10D) of the Income Tax Act, 1961.

Factors to Consider When Buying a Term Insurance Plan

Before buying a term plan you must consider certain factors to make a wise decision. Here are the factors you need to consider when choosing a term insurance plan:

1. Compare various term plans

   You must compare various term plans before buying a term plan. It helps you choose the right term insurance plan.

2. Choose only necessary riders

   You must choose only necessary riders with your term plan as every rider costs you an additional amount. Choose the riders that best suit your needs.

3. Check the claim settlement ratio of the insurer

   You must check the claim settlement ratio of an insurance company before buying a term plan. This ratio highlights how effectively the insurance company settled the claims received by them.

4. Choose the appropriate sum assured

   Ideally, your sum assured should be 20 to 25X of your annual income. You must choose the sum assured that aligns with your financial objectives and goals.

5. Read and understand your policy documents

   You must read your policy documents carefully when buying a term plan. If you are facing any doubts you must ask your insurer for clarity.

How Much Term Life Insurance Coverage Do I Need?

Your term life insurance cover depends on various factors such as financial needs, cost of living, annual income, number of dependents, future inflation, etc.

A human life value calculator helps you choose the ideal right term insurance coverage. You can calculate human life value within a few seconds by entering certain details including your age, annual income, investments, loans, future goals, etc.

We have provided a basic rule to calculate your human life value.

How to Buy a Term Insurance Policy?

Buying a term plan is an easy task. You can buy a term insurance plan either from the insurance company’s website or from one of the trusted web aggregators, such as PolicyX.com.

Buying from the insurer’s website

Step 1: Visit the official website of the insurer.

Step 2: Click on ’Buy Insurance’ and select the desired term plan.

Step 3: Fill in the required details including your age, gender, education qualifications, and other required details.

Step 4: The premium amount will be displayed on the screen.

Step 5: Pay the premiums through available payment options such as UPI, credit card, debit card, etc.

Buying from PolicyX.com

Step 1: Visit the PolicyX website.

Step 2: Click on ’Term Insurance’.

Step 3: Fill out your age, city, annual income, name, and mobile number.

Step 4: Enter your date of birth, education qualification, occupation type, and smoking habits.

Step 5: Various term plans will be displayed according to the provided details.

Step 6: Choose the desired plan and click on ’Buy Now’.

Step 7: Proceed to make payment via available payment modes such as UPI, net banking, credit card, debit card, etc.

You will receive the policy details via e-mail and WhatsApp once the payment is made.

Why Choose PolicyX.com to Buy Term Policy?

Here are the reasons why you should choose PolicyX.com to buy a term insurance plan.

Best Term Insurance Plans in 2025

We have compiled a list of the best term insurance plans in 2025 that you can consider to choose from. To make this list we have considered certain parameters including the claim-settlement ratio, solvency ratio, brand reputation, and trust.

Conclusion

Term insurance is one of the simplest and most affordable forms of life insurance. Buying a term insurance policy in your early 20s is the best financial decision for your life. It is the best gift you can give to your loved ones. Choosing the right term insurance plan is important to make sure that your loved ones are financially safe even in your absence.

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