Ravi glanced at the photo of his daughter’s first day at school, his smile hiding an undercurrent of worry. He had just become the sole breadwinner of his young family following his father’s sudden illness. “If anything happens to me, who will look after them?” he asked himself. That question brought him to the door of investing not just in markets, but in protection—via a term insurance plan.
For readers who want to know how to choose the right term insurance plan, this article walks you through the key decisions—supported by real data and framed around your family’s future. It’s a journey from knowing what a term plan is, to how much you need, how long the cover should last, and which insurer to trust.
Understanding What a Term Insurance Plan Is:
A term insurance plan is the simplest form of life insurance: you pay regular premiums for a fixed term, and if you die during that term, your nominee receives the sum assured. If you survive, there’s typically no payout. The beauty lies in its pure protection focus—without savings or investment components complicating things. Knowing this helps you zero in on the “cover-cost-benefit” equation: how much protection you need, how much you can pay, and how long you need it.
Assessing Your Financial Goals and Family Needs:
To decide “how to choose the right term insurance plan,” first reflect on your financial goals and your family’s needs. Let’s say you’re 35, married with one child aged 3. You expect 15 more years of working income, have a home loan of ₹30 lakh, and wish to fund your child’s college in 12 years. Your financial goal might be: replace your present income stream, clear the home loan, and ensure the child’s education costs are met. So the term plan’s sum assured should cover these combined needs—plus inflation, plus some buffer.
If you underestimate your goals (for example, only covering the loan but not the lost income), you risk the family surviving—but with compromised lifestyle. That’s why knowing your goals is the starting point.
Evaluating Policy Tenure: How Long Should Your Coverage Last?
Choosing tenure is a major variable. If you aim to retire at 60, you may want coverage till that age. If your child finishes higher education by age 21, you may want cover until age 55. The mantra: your cover should last at least until your financial dependents can stand on their own. For someone who takes a term plan at age 30, a common tenure is 30 years (i.e., till age 60). With shorter tenure, you may end up unprotected in later years when your lifestyle and liabilities are highest. So aligning tenure with your life stage is vital.
Premium Affordability vs Coverage Adequacy
When choosing a term insurance plan, one of the biggest decisions is balancing premium affordability with coverage adequacy. On one hand, a high sum assured ensures your family will be financially secure if the unexpected happens—but it also comes with higher premiums. Paying a premium that strains your budget could lead to missed payments or policy lapse, defeating the purpose of having insurance.
On the other hand, prioritizing affordability and choosing a low premium may seem easy on the wallet, but it can leave your family under-protected. For example, a ₹50 lakh policy may have cheap premiums, but if your financial liabilities, income replacement needs, and children’s future education costs total ₹2 crore, the coverage is clearly inadequate.
The key is to strike a balance: choose a sum assured that fully covers your financial responsibilities while keeping premiums manageable, ideally around 10–15% of your monthly income. Using online term insurance calculators can help simulate different scenarios, allowing you to pick a plan that protects your family without putting your finances under stress.
Riders and Add-ons: Enhancing Your Protection
Once basic cover is in place, consider whether you need additional riders (or add-ons). Examples include accidental death benefit rider (adds extra sum assured if death happens in accident), critical illness rider (pays extra if you are diagnosed with serious illness), waiver of premium (premium is waived if you lose earning capacity). These enhancements make the term plan more holistic—but they also raise premiums. So only include riders if your budget allows and your risk profile demands it.
For instance, if you have a high-risk job, an accidental death rider might make sense. If you carry family history of serious illness, a critical-illness add-on could help. The key: they are optional, not mandatory.
Claim Settlement Ratio: Why It’s a Crucial Factor
One of the most overlooked elements when people try to figure out how to choose the right term insurance plan is the insurer’s credibility—and that brings us to the Claim Settlement Ratio (CSR).
CSR = (number of claims settled ÷ number of claims received) × 100
In India, top companies report CSRs of 99%+ for individual death claims under term plans: for example, HDFC Life Insurance Company claims 99.68% for FY 24-25 And Tata AIA Life Insurance Company reports 99.41% for the same period. Choosing an insurer with a consistently high CSR improves the likelihood that your nominee will receive the benefit smoothly. Alongside CSR, also look at solvency ratio (which indicates the financial strength of the company) and customer service reputation.
Comparing Insurers and Online Plans:
Now that you know what to check in a term plan, the next step is comparing offers. Many insurers now offer purely online term plans—less paperwork, cheaper premiums, sometimes faster claim settlement. Use portals or direct websites to compare (age, tenure, cover, premium) for the same profile so you know who offers the best value. But don’t just pick the cheapest—check what features are included (like cover for death due to accident, illness, suicide clause, waiting period), check the ease of online application and offline support (in case you or your nominee need help). Also check whether the insurer has any exclusions or limitations buried in the fine print.
Tax Benefits Under Section 80C and 10(10D):
When you buy a term insurance plan, you also get tax savings. Premiums paid are eligible for deduction under Section 80C of the Income Tax Department (up to ₹1.5 lakh in total for 80C and related allowances). In addition, the death benefit (sum assured) is tax-free in the hands of the nominee under Section 10(10D) provided conditions are met. These tax perks make term plans even more attractive—they help reduce your taxable income while providing protection. Note: Tax laws change, so always refer to the current year’s rules.
Common Mistakes to Avoid When Buying Term Insurance:
When people try to learn how to choose the right term insurance plan, they often stumble into the same pitfalls:
- Under-insuring: Taking a cover that’s too small—maybe just the loan amount—while ignoring income replacement and inflation.
- Buying too short a tenure: Choosing a term of 10-15 years when you still have 20-30 years of earning potential.
- Only going for lowest premium: Choosing the cheapest insurer without checking exclusions, CSR or claim process.
- Not disclosing medical history properly: Leading to claim rejection later.
- Procrastinating till older age: Premiums rise with age; buying younger gives lower premium and longer cover.
- Ignoring riders or policy features: Not checking whether accidental death, critical illness cover, or waiver of premium exist or how they cost.
By avoiding these mistakes, you strengthen your choice and ensure the protection you buy remains robust when it’s needed.
FAQs – Term Insurance Plan
Q1: Who should buy a term insurance plan?
👉If you have dependents (children, spouse, elderly parents), outstanding loans, or anticipated big expenses—yes, you should strongly consider one. If you have neither dependents nor debt and your assets already fully cover your commitments, you might defer—but it’s rare.
Q2: When is the best age to buy it?
👉Earlier is better: buying at 25–35 years gives you lower premiums, longer tenure, and higher likelihood that your family remains protected through prime earning years. Premiums rise with age and health changes.
Q3: How much cover do I need?
👉There’s no one-size fits all. A rough method: Annual income × remaining years to retirement + outstanding loans + future education costs + buffer for inflation. You could also use a multiple: many advisers suggest 10–15 × your annual income as a minimum starting point.
Q4: Is online term plan safe?
👉Yes—online plans are safe provided the insurer is IRDAI-registered, the premium payment and document submission are secure, and you receive the policy document. They often have lower loading (cheaper premium) because of lower overheads. But ensure you read the fine print.
Q5: What happens if I stop paying premiums?
👉Usually, the policy lapses—meaning cover ends and no benefit is paid on death. Some policies may have a grace period or “revival” facility, but it’s best not to let premiums miss. That’s why choosing a premium you can comfortably afford is critical.
Conclusion:
Term Insurance Plan is not just a policy—it’s your peace-of-mind mechanism. When you know what it is, why you need it, how long it should last, how much to take, and which insurer to trust, you’re well on your way to a decision that safeguards your family. Align your financial goals and liabilities, choose a tenure that spans your dependent years, balance premium affordability with adequate cover, vet insurers for their claim settlement ratio and reputation, and compare plans sensibly. If you avoid the common mistakes and make an informed, tailored choice, you’ll be able to move ahead with confidence and clarity—knowing your loved ones are protected.
Are you ready to pick the right term insurance plan today?
