Buying term life insurance is not simply about finding a low premium. The more important decisions are how much cover you need, how long the policy should last and which features suit your financial needs.
A sensible approach is to assess your financial responsibilities first and then compare plans based on those requirements. This can help you choose a term insurance plan that provides suitable cover during the years when your family may depend on your income.
Understand what term insurance covers
Term insurance is a type of life insurance that provides financial protection for a fixed period. You pay premiums for the chosen policy term. If the life assured dies during this period, the nominee receives the applicable death cover, subject to the policy terms and conditions.
A standard term plan is designed mainly for protection. If the policyholder survives the term, the policy generally ends without a maturity payout, unless the plan specifically includes a return-of-premium feature.
Because term insurance focuses on protection rather than savings, it can provide a relatively high amount of life cover for a comparatively lower premium than many savings-oriented life insurance policies.
Calculate how much cover your family may need
A suitable life cover amount depends on the financial responsibilities you want the policy to account for. Consider the commitments your family may need to manage in your absence, such as outstanding loans, household expenses, children’s education and other long-term goals.
Looking at these expenses first can help you estimate an appropriate level of cover, rather than choosing an amount based only on the premium.
You can use this simple approach:
- Add outstanding loans and major liabilities.
- Estimate several years of household expenses.
- Include important future costs, such as children’s education.
- Subtract savings and investments that your family could reasonably use.
Some people use 10 to 15 times their annual income as an initial estimate. However, this is only a starting point. Your actual requirement may be higher or lower depending on your liabilities, dependants, savings and future financial goals.
For example, someone with a home loan and young children may need more cover than another person with the same income but fewer financial commitments.
Choose a policy term that matches your responsibilities
The policy should ideally remain active through the years when your family depends most on your income.
Think about when you expect to retire, when major loans will be repaid and when your children are likely to become financially independent. Your policy term should account for these milestones.
Choosing a shorter term only because it has a lower premium can create a problem later. If you need life cover again at an older age, the premium may be higher, and the insurer may require fresh medical underwriting.
The aim is not simply to choose the longest possible term. It is to choose a term that matches your financial responsibilities.
Compare the policy beyond its premium
Premium is an important factor, but it should not be the only one. When comparing a term insurance plan, look at the policy conditions and features alongside the price. Pay attention to exclusions, premium payment options, grace periods and the rules for reinstating a lapsed policy.
The insurer’s claims record can also provide useful information. Instead of focusing on a single year’s figure, look at claims-related data over multiple years and understand what the numbers actually represent.
Also check how the death cover is paid. Depending on the policy, the payout may be available as a lump sum, regular income or a combination of both. Consider what would be easier for your nominee to manage.
Provide complete and accurate information
The proposal form is one of the most important parts of buying life insurance. Information about your health, medical history, occupation, lifestyle and tobacco or alcohol use can affect underwriting and the premium.
Answer every question honestly. For example, if you smoke, disclose it even if doing so increases the premium. Hiding relevant information can create complications during claim assessment.
Medical tests may also be requested, particularly for higher amounts of cover or depending on the insurer’s underwriting requirements. These tests are a normal part of assessing the risk and should not automatically be viewed as a reason to avoid a policy.
Review the policy during the free look period
Buying a policy does not mean you have to accept the document without checking it.
IRDAI’s policyholder protection framework provides a 30-day free look period for eligible life insurance policies with a term of one year or more. The period starts from the date of receipt of the policy document. If you are not satisfied with the terms and conditions, you can request cancellation during this period, subject to the applicable rules and deductions.
Use this time to check the policy schedule, cover amount, policy term, premium, exclusions, nominee details and other important conditions. If anything differs from what you understood while buying the policy, seek clarification promptly.
Consider riders based on your actual needs
Riders are additional covers that can be attached to a life insurance policy for an extra premium. Common examples include accidental death cover, critical illness cover and waiver of premium.
They can be useful in some situations, but adding every available rider is not necessary. Read the rider’s eligibility conditions, exclusions and payout rules before choosing one.
The right question is not how many riders a plan offers. It is whether a particular rider fills a genuine gap in your financial protection.
Keep the latest tax and GST rules in mind
Tax treatment should be checked separately from the insurance decision because it can change over time.
From 22 September 2025, individual life insurance policies became exempt from GST, so GST is no longer charged on eligible individual life insurance premiums. The exemption does not apply in the same way to group insurance arrangements.
Life insurance premiums may also qualify for a deduction of up to Rs. 1.5 lakh under Section 123 of the Income Tax Act, 2025, subject to the applicable conditions. Understanding what is term insurance can also help you choose a suitable life insurance policy based on your financial protection needs. The deduction is available under the old tax regime.
Tax rules can depend on your policy and tax situation, so they should not be the main reason for selecting a term plan.
Conclusion
Buying term insurance becomes easier when you take it step by step. Estimate the cover you need, choose a suitable policy term, and compare premiums, exclusions and policy features.
Finally, fill in the proposal form honestly and review the policy during the free look period. This can help ensure the policy provides the financial protection your family may need.
