Insurance
What Is Term Insurance? Meaning, Cover & Cost (India)
Quick answer
Pure life cover that pays your family a large sum if you die during the policy term, at a tiny premium.
Term insurance is the simplest, cheapest life cover. You pay a small yearly premium, and if you die during the term, your family gets a big payout (the sum assured).
How it works: pick a cover amount and tenure (say ₹1 crore for 30 years), pay premiums yearly or monthly, and stay healthy enough for underwriting at purchase. No death during the term → no payout. That is why premiums stay low.
It has no investment or maturity value. Agents hate selling it because commissions are thin compared with ULIPs and endowment plans — which is exactly why you should prefer it.
Who it's for: anyone with dependents — spouse, kids, ageing parents who rely on your income. If nobody depends on your salary, you may not need life cover yet; health insurance still matters.
Aim for cover of roughly 10–15 times your annual income, or enough to replace income and clear big loans (home loan especially). A ₹12L salary often points toward ₹1–1.5 crore cover, not ₹25L that agents push as "enough."
Common mistakes: buying ULIP or endowment thinking it is "better" because money returns, under-insuring to save ₹200/month, hiding health history (claims get rejected), and letting the policy lapse after two years.
Versus ULIP/endowment: those mix weak cover with expensive investing. Versus employer group cover: useful extra, but it vanishes when you quit — own term is the base layer. Buy online from IRDAI-registered insurers and check claim settlement ratios.
For example
A healthy 30-year-old can get ₹1 crore of term cover for roughly ₹800–₹1,200/month. The same budget poured into a ULIP often buys a fraction of that cover plus mediocre fund returns.
Gen Z practical guide
Skip the textbook — Term insurance vs ULIP →Common questions
- What is term insurance?
- Term insurance is pure life cover for a fixed period — if you die during the term, your nominee gets the sum assured. There is no maturity investment payout if you outlive the policy.
- How much term cover do I need in India?
- A common rule is 10–15× annual income for young earners with dependents. Skip agents pushing ULIP as 'investment + insurance' — buy cheap term and invest separately via SIP.
- Term insurance vs ULIP — which is better?
- Term gives more cover per rupee of premium. ULIP mixes insurance with market funds and usually has higher charges. For most Gen Z buyers, term + mutual fund SIP wins on both protection and returns.
- When should I buy term insurance?
- As soon as someone depends on your income — parents, spouse, or a home loan co-borrower. Premiums are lowest when you are young and healthy.