Term Insurance in India: How Much Cover You Need and What to Skip

Most life insurance sold in India is sold, not bought. Someone in the family knows an agent, a bank relationship manager pitches a "guaranteed return" plan, and years later you're paying ₹60,000 a year for ₹10 lakh of cover that wouldn't keep your family going for three years.

Term insurance is the opposite of that experience. It's simple, cheap for what it gives you, and almost nobody earns a fat commission selling it, which is partly why you hear less about it.

You pay a premium every year. If you die during the policy term, your nominee gets the sum assured, say ₹1.5 crore. If you survive the term, you get nothing back.

That last part bothers people. "So I pay for 30 years and get nothing?"

Think of it the way you think about car insurance or health insurance. You don't feel cheated when you don't crash your car. You paid for protection, and you had it every day of those 30 years.

Ask one question: if I died tomorrow, would anyone's life get financially harder?

You need term insurance if:

• You have a spouse who relies fully or partly on your income
• You have children
• You support your parents, or will soon
• You have a home loan or other large loan that would fall on your family

You probably don't need it yet if you're single, have no loans, and your parents are financially independent. A 23-year-old fresher with no dependants is better off building an emergency fund and buying health insurance first. That said, premiums are lowest when you're young and healthy, so many people buy a modest cover early and add more later.

A rough but practical rule is 10 to 15 times your annual income. A better approach is to estimate what your family would actually need.

Add up:

1. Living expenses replacement. Your family's yearly expenses multiplied by the number of years they'd need support. For young children, that might be until the youngest finishes education.
2. Outstanding loans. Home loan, car loan, education loan, anything that would land on your spouse or parents.
3. Big future goals. Children's higher education, a parent's healthcare.

Then subtract:

• Existing savings and investments your family could use
• Existing life cover (including any group term cover from your employer, but be careful, more on that below)

Meera is 32, lives in Bengaluru and earns ₹18 lakh a year. Her husband earns too, but they planned their life around two incomes. They have a 3-year-old and a ₹45 lakh home loan.

• Household expenses that her income covers: ₹6 lakh a year for 20 years. With inflation and returns roughly cancelling out, call it ₹1.2 crore.
• Home loan outstanding: ₹45 lakh
• Child's higher education fund: ₹30 lakh
• Minus existing investments: –₹15 lakh

Total: about ₹1.8 crore. Rounding to a ₹2 crore cover is sensible, and 10–15× her income (₹1.8 to ₹2.7 crore) lands in the same range.

Many companies give group term insurance worth 2–5 times your CTC. It's a nice benefit, but:

• It ends when you leave the job, or lose it.
• If you develop a health condition later, buying fresh cover becomes expensive or difficult.
• The cover is usually far smaller than what your family needs.

Treat employer cover as a bonus, not as your plan.

Cover yourself until the age when your family stops depending on your income. For most people that's retirement, around 60 to 65.

Avoid cover "till 85" or "whole life" unless you have a specific reason. By 70, your children should be independent and your loans paid. Paying extra for decades of cover you don't need is money that could be invested instead.

Premiums depend on age, health, smoking, cover amount and policy term. For a healthy, non-smoking 30-year-old, a ₹1 crore cover until 60 often costs somewhere in the region of ₹10,000 to ₹20,000 a year. Smokers can pay close to double.

Because the premium is fixed for the whole term when you buy, a policy bought at 28 stays at the 28-year-old's price even when you're 50.

Riders are optional extras. Some are useful. Many are padding.

Often worth considering:

• Waiver of premium on disability or critical illness. If you can't work, future premiums are waived and the cover continues. Cheap and useful.
• Accidental death benefit. Pays an extra amount if death is due to an accident. Inexpensive, though your base cover should already be enough.

Think carefully:

• Critical illness rider. Pays a lump sum on diagnosis of listed illnesses. It can be valuable, but the definitions are strict. A standalone critical illness policy or a good health insurance plan may serve you better. Read what's actually covered.

Usually skip:

• Return of premium (TROP) plans. These return your premiums if you survive. That sounds attractive, but they cost much more, and if you invested the difference in premiums yourself, you'd usually end up with far more money.

Most rejected claims come down to one thing: non-disclosure.

When you fill the proposal form, tell the insurer:

• If you smoke, drink or chew tobacco, even occasionally
• Any existing illness: diabetes, blood pressure, thyroid, past surgeries
• Your real income and occupation
• Any other life insurance you hold

It might raise your premium a little. It also makes the policy hard to reject. Under Section 45 of the Insurance Act, once a policy has been in force for three years, the insurer cannot reject a claim on grounds of misstatement, except for proven fraud. In the first three years, though, a hidden smoking habit or medical history can sink a claim.

Also tell your family that the policy exists. A policy nobody knows about doesn't protect anyone.

Look at:

• Claim settlement ratio (the percentage of claims paid) over several years, not just the latest one. Many insurers are above 97–98%.
• Amount settlement ratio, which tells you whether large claims get paid, not just small ones.
• Complaint volume. IRDAI publishes data on grievances.
• Ease of buying and medical tests. A policy issued after proper medical tests generally holds up better at claim time than one issued with almost no checks.

Some people split cover across two insurers, for example ₹1 crore each with two companies. It's not essential, but it spreads the risk.

If you're a married man, you can buy your policy under the Married Women's Property Act (MWPA). The payout then goes to your wife and/or children and can't be claimed by creditors or relatives. It costs nothing extra, and you select it when buying. If you have loans or a complicated family situation, it's worth considering.

• Buying too little cover because ₹50 lakh "sounds like a lot".
• Mixing insurance with investment through endowment and money-back plans with low cover and low returns.
• Stopping premiums after a job change. A lapsed policy protects nobody.
• Not updating nominees after marriage or children.
• Waiting until 40 when premiums are higher and health issues may have appeared.

Yes, if someone depends on your income. You're paying a small amount to protect your family from a catastrophic financial loss. That's the job of insurance. Returns are the job of investments.

Some policies offer "life stage" options to increase cover on marriage or childbirth. Otherwise, you can buy an additional policy. You'll pay the premium for your age and health at that time.

For larger covers, insurers usually ask for medical tests, often arranged at home or a nearby lab. It's a good sign. A policy issued after tests leaves less room for disputes later.

Death due to illness, including pandemic illnesses, is generally covered. Suicide is excluded in the first 12 months. In that case the nominee typically receives at least 80% of the premiums paid, not the sum assured. After the first year, it is covered. Check your policy wording.

A homemaker's work has real financial value, like childcare and running the home, and replacing it costs money. Some insurers offer cover for non-earning spouses, usually with limits linked to the earning partner's cover.

This article is educational and not a recommendation of any specific policy. Premium ranges are indicative as of October 2026; get actual quotes and read the policy wording before buying.