How much term insurance cover do I need?

The standard recommendation is 15-20x your annual income. If you earn 15 LPA, your cover should be 2.25-3 crore. This ensures your family can replace your income for 15-20 years, pay off loans, and fund children education. Increase the multiplier if you have a home loan or other large liabilities.

Is LIC better than private insurers for term insurance?

LIC has the highest brand trust but its term plans are 2-3x more expensive than online plans from private insurers. HDFC Life, ICICI Prudential, Max Life, and Tata AIA offer cheaper premiums with claim settlement ratios above 98%. For term insurance, the premium difference is significant over 30+ years.

What riders should I add to term insurance?

Two riders worth considering: Critical Illness rider (pays lumpsum on diagnosis of cancer, heart attack, stroke, etc.) and Waiver of Premium rider (waives future premiums if you become disabled). Accidental death rider is usually not worth the cost as the base plan already covers accidental death.

Term Insurance in India: How Much Cover, Which Company, and Common Mistakes

Complete term insurance guide for India. Cover should be 15-20x annual income. Buy before 30 for cheapest premiums. Online plans are 40% cheaper. Claim settlement ratios compared.

Term insurance is the simplest financial product: you pay a premium every year. If you die during the policy term, your family gets the sum assured. If you survive, you get nothing back. It is pure protection, not an investment.

This "nothing back" scares people. So they buy endowment plans or ULIPs instead, paying 10-20x more in premium for a product that gives mediocre returns AND inadequate cover. A 30-year-old paying Rs 40,000/year for a 50 lakh endowment plan could have gotten 1.5 crore term cover for Rs 12,000/year and invested the remaining 28,000 in ELSS for far superior returns.

How Much Cover Do You Need?

The formula: (Annual income x 15-20) + outstanding loans + future liabilities (children education, wedding). Minus: existing investments and savings.

Example: Amit, 30, earns 15 LPA. Home loan: 40 lakh. Children's education fund needed: 30 lakh. Current investments: 20 lakh.

Cover needed: (15 x 15) + 40 + 30 - 20 = 2.75 crore. Round up to 3 crore.

As you age, your investments grow and liabilities shrink (home loan gets paid off, children become independent). Your effective need for insurance decreases. But your premium is locked at the purchase rate, so buying more cover early is always cheaper than adding cover later.

Buy Before 30: The Premium Advantage

Age at Purchase	Annual Premium (1 Cr cover, online, non-smoker, male)	Premium till 60
25	Rs 7,500	Rs 2,62,500
30	Rs 10,500	Rs 3,15,000
35	Rs 15,500	Rs 3,87,500
40	Rs 24,000	Rs 4,80,000
45	Rs 38,000	Rs 5,70,000

Buying at 25 vs 40: the annual premium is 3.2x cheaper, and the total premium paid over the policy term is 45% less. Every year you delay costs you money.

Female premiums are 20-30% lower than male premiums at the same age (women have longer life expectancy statistically). Non-smokers pay 40-50% less than smokers.

Online vs Offline: A 40% Premium Gap

Online term plans (bought directly from the insurer's website) are 30-40% cheaper than offline plans (bought through an agent). The coverage is identical. The only difference: no agent commission is built into the online premium.

For a 30-year-old male, 1 crore cover: HDFC Click 2 Protect Life (online) = Rs 10,500/year. The same coverage through an HDFC agent = Rs 14,000-16,000/year. Over 30 years, that is Rs 1.05-1.65 lakh saved in agent commissions.

Claim Settlement Ratio: The Number That Matters

CSR tells you what percentage of death claims the insurer paid out in the previous year. Higher is better.

Insurer	Claim Settlement Ratio (FY 2024-25)	Claims Paid
LIC	98.5%	2.87 crore claims
Max Life	99.5%	12,800 claims
HDFC Life	99.1%	18,500 claims
ICICI Prudential	98.2%	15,200 claims
Tata AIA	99.1%	8,900 claims
SBI Life	97.8%	21,000 claims

All major insurers have CSRs above 97%. The rejected 1-3% are almost always due to non-disclosure (hiding medical conditions) or fraud, not arbitrary claim rejection. If you declare your health honestly at purchase, your claim will be paid.

Riders Worth Buying

Critical Illness Rider: Pays a lumpsum (Rs 25-50 lakh) if you are diagnosed with specified illnesses: cancer, heart attack, stroke, kidney failure, etc. This pays while you are alive, covering treatment costs and income replacement during recovery. Costs Rs 2,000-5,000/year for 25 lakh cover. Worth it.

Waiver of Premium: If you become permanently disabled (accident or illness), all future premiums are waived and the policy continues. Costs Rs 500-1,500/year. Worth it, especially for sole earners.

Accidental Death Benefit: Pays an additional amount if death is due to an accident. Not recommended because your base term plan already covers accidental death. The base payout goes to your family regardless of how you die. The additional rider premium is better spent on higher base cover.

What to Disclose (Everything)

The proposal form asks about your medical history, family history, smoking/drinking habits, occupation, and travel plans. Disclose everything truthfully. A hidden diabetes diagnosis discovered during claim investigation can lead to claim rejection, even if diabetes had nothing to do with the cause of death.

The insurer can investigate claims filed within the first 3 years of the policy (the "contestability period"). After 3 years, the scope for rejection narrows significantly. But even beyond 3 years, material non-disclosure (hiding a cancer diagnosis, for example) can void the policy.

When Do You NOT Need Term Insurance?

If nobody depends on your income financially, you do not need term insurance. A single 25-year-old with no dependents and no loans does not need life insurance. A retired person whose children are financially independent and has no debt does not need it.

Buy term insurance when: you get married (spouse depends on you), when you have children (they depend on you for 20+ years), when you take a home loan (your family should not inherit the EMI). Drop or reduce coverage when: children become independent, home loan is paid off, and retirement savings are sufficient.

Term Insurance vs Endowment vs ULIP

A 30-year-old buying Rs 1 crore cover for 30 years:

Term plan: Rs 10,500/year. If he dies, family gets 1 crore. If he survives, gets nothing. Remaining Rs 29,500 (of a Rs 40,000 budget) invested in ELSS at 13%: Rs 1.06 crore at age 60.

Endowment plan: Rs 40,000/year. If he dies, family gets 1 crore. If he survives, gets approximately 30-35 lakh (4-5% CAGR returns). Terrible compared to term + ELSS combination.

ULIP: Rs 40,000/year. If he dies, family gets 1 crore or fund value (whichever is higher). If he survives, gets fund value (equity ULIP might give 8-10% CAGR after charges, so 45-70 lakh). Better than endowment, but still worse than term + direct equity mutual fund.

The winner is always: cheapest term plan + invest the difference in ELSS/equity mutual funds. Every financial advisor worth their fee will tell you this. Calculate your tax savings on 80C using our income tax calculator.

The Bottom Line

Buy a term plan of 15-20x your income, online, before age 30. Choose a policy with no co-pay on claims, add critical illness and waiver of premium riders. Disclose your health history honestly. Pay the premium annually (monthly payment adds 5-8% loading). And invest the money you saved by not buying an endowment plan.

Your family's financial security after your death is not the place to be frugal or to gamble on an investment-cum-insurance hybrid. Pure protection via term insurance is the right answer. Period.