A term plan is a reliable way to safeguard your loved ones if something untoward is to happen. You pay an affordable premium to receive a large sum assured, so your family has financial backup in your absence. Choosing one might look simple at first, but the details can get confusing once you start comparing options.
People often ask, “How much coverage do I need?” or “Should I pick a term insurance with return of premium?” These questions come up because the stakes are high—you want the best financial safety net for your family.
This post explains how to decide the right coverage amount and tenure for your policy, along with a few tips on managing costs without giving up useful features.
Know Your Financial Responsibilities
Start by listing your monthly expenses, such as rent, groceries, and your child’s tuition fees. Then add up future costs like a planned home renovation or your parents’ medical bills. If you have loans for a car or home, those must be included too. This process helps you see how much your family might need when you are gone. A common rule of thumb is to choose a sum assured that’s 10–15 times your annual income. For example, if you earn Rs. 10 lakhs annually, your coverage should ideally be between Rs. 1 crore and Rs. 1.5 crore.
Policy tenure should match the years you expect your loved ones to rely on your income. If you think your responsibilities will be heavy for the next two decades, aim for a 20-year policy. Many people choose coverage until they reach 60 or 65, especially if they have long-term financial goals. That way, big milestones, like a child’s higher studies or clearing a mortgage, are taken care of.
Riders can upgrade your plan. These are add-ons, like a disability rider or a critical illness rider. Some riders even waive future premiums if you become seriously ill. People in jobs with high physical risks, like field technicians, often appreciate accidental death cover. A single rider can boost overall protection and reduce stress about unpredictable events.
Insurers look at medical records to decide premium rates. Smoking, high cholesterol, or a family history of major conditions can raise your premiums. It’s best to buy insurance early when rates are more manageable.
An insurer’s claim settlement track record shows how committed they are to honour valid claims. High figures (above 95%) suggest your family won’t have to deal with an unnecessary battle over payouts. Premium insurance providers like Axis Max Life Insurance often have ratios touching 99% or more, which gives many users peace of mind.
Payment options vary. Some people pay monthly, which is easier on the wallet. Others choose quarterly or yearly. There’s also limited pay, which means you finish your premium payments in a shorter span, but continue with the coverage for the entire term. Evaluate how your cash flow works to decide on a payment style that aligns with your salary cycle or business income pattern.
A very high sum assured sounds good, but it can strain your budget. On the other hand, an extremely low cover might not help your family enough if something goes wrong. You need to strike a balance. If you feel the recommended sum assured of 10-15 times your annual income is hard to afford, pick a slightly lower number and consider stepping it up later when your income grows. Some plans let you increase coverage after big life events, like getting married or having a child.
You’re not just purchasing coverage for a year. You’re planning for a decade or longer, so be honest about what you can sustain. If you have to skip essential monthly expenses to pay an exorbitant premium, that’s not sustainable. On the other hand, going for a bare-bones policy just to save a little each month might shortchange your family when they need support.
Term insurance plans often qualify for deductions under Section 80C, which means a portion of your premiums could lower your taxable income by up to Rs. 1.5 lakh. Payouts are typically tax-free under Section 10(10D), subject to certain conditions. These advantages improve the deal, though you should never buy a plan solely for tax benefits. The main aim is to protect dependents.
You might see term insurance with return of premium plan and wonder if it’s worth the higher cost. Here’s a quick table to help you understand the differences (and similarities):
| Feature | Zero Cost Term Insurance | Traditional Term Plan |
| Premium Refund | Yes (excluding taxes) | No |
| Premiums | Slightly higher | Lower |
| Death Benefit | Yes | Yes |
| Maturity Benefit | Premium refund | None |
| Cost Effectiveness | High (due to refund) | Moderate |
Before finalising your policy, run through this checklist:
Picking the right term plan all comes down to proper planning. Find out your family’s future needs, choose coverage that can handle major costs, and determine whether extra riders are worth it. Some prefer no-frills protection, while others opt for term insurance with a return of premium so they can get their money back at maturity. Look into claim settlement ratios, read policy documents carefully, and study your insurer’s reputation. If you do that, you’ll be on a good path for choosing the right coverage for your term plan according to your needs.
*Standard T&C apply
*Tax benefits are as per prevailing tax laws which are subject to change.
*Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
*Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
