How it works
You choose a sum assured (for example ₹1 crore) and a term (for example until age 60). You pay a premium, usually yearly or monthly. If you die within the term, the nominee receives the sum assured. If you survive, the policy ends without a payout (return-of-premium variants exist, at higher cost). Because it only covers risk, term insurance gives the highest cover per rupee of premium among life policies.
What decides the premium
- Your age when you buy (younger is cheaper, and the premium stays level for the term)
- Sum assured and term
- Smoking and health history
- Occupation and income
- Add-ons you choose
Riders (optional extras)
| Rider | What it adds |
|---|---|
| Accidental death benefit | Extra payout if death is accidental |
| Critical illness | Lump sum on diagnosis of a listed illness |
| Waiver of premium | Future premiums waived if you become disabled or critically ill |
Each rider adds cost and has its own terms. Add only the ones you will use.
How much cover
The standard approach is to size cover to your family's needs, not to a guess. See Human Life Value: the present value of the expenses your family would need, plus loans, minus what you already have. Use the term insurance calculator.
Rules that protect you
- Free-look period. From 1 April 2024, IRDAI allows 30 days (earlier 15) after you receive a new policy to review it and return it for a refund, less specified deductions.
- Three-year rule. Under Section 45 of the Insurance Act, once a policy has been in force for three years, the insurer generally cannot repudiate a claim on the ground of a misstatement unless it proves fraud. Within three years, wrong or missing disclosures are the most common reason claims fail.
- Nomination. Name a nominee and keep details current.
Disclose honestly
Answer every question on smoking, health, income and existing policies completely. A claim can be rejected for material non-disclosure, which is the usual reason a family is refused cover they thought they had.
Tax
Premiums may qualify for a deduction within the ₹1.5 lakh limit in the old regime (Section 123 under the Income-tax Act, 2025), and death proceeds are generally exempt under Section 10(10D). Check conditions with your adviser.
Choosing a policy
Compare the insurer's claim settlement ratio (published in IRDAI's annual report and by insurers), claims paid by amount and not only by number, the complaint record and the exclusions. Do not choose on premium alone.
Questions people ask
What is term insurance in simple words?
Pure life cover for a fixed number of years.
Do I get money back at the end of a term plan?
Not in a standard term plan. Return-of-premium variants do, at a higher premium.
When should I buy term insurance?
As early as you have dependents or loans; premiums are lower when you are young and healthy.
How much term insurance do I need?
Enough to replace your family's needs and clear loans. A common starting rule is 10 to 15 times annual income, but a needs-based calculation is better.
What is the free-look period?
The window (now 30 days) to cancel a new policy for a refund.
Keep going
Run the numbers
Term insurance calculator
How we can help
Sources
- IRDAI (Protection of Policyholders' Interests and Allied Matters of Insurers) Regulations, 2024 (30-day free look from 1 April 2024)
- Insurance Act, 1938, Section 45 as amended in 2015
- Income-tax Act, 2025.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. This page is general education, not personal advice. Back to the full glossary