How much term insurance cover do I need?

A standard rule is 10–15× your annual gross income, plus all outstanding loans, plus a buffer for kids' education. So if you earn ₹15 lakh/year and have a ₹50 lakh home loan and one child, target ₹2.5–3 crore. Cover should let your family clear all debts and live for 12+ years on safe-investment income from the lump sum without your salary.

Which insurer should I buy from?

Look at the IRDAI Claim Settlement Ratio (target 95%+) AND the Claim Settlement Amount Ratio (which weighs by claim value, not just count). Established insurers like LIC, HDFC Life, ICICI Pru, Max Life, and Tata AIA have strong long-term records. Don't chase the cheapest premium — a 5% lower premium isn't worth a higher claim rejection risk.

Should I buy return-of-premium term plans?

No. Return-of-premium (ROP) plans charge you 2–3× the regular term premium and 'return' your money after 30 years — but you've lost decades of compounding. Buy the cheaper pure term plan and invest the premium difference in equity. Over 25–30 years, the investment far exceeds the 'return' value.

What term should I choose — till 60, 65, or 75?

Cover until age 60 or 65 is sufficient for most people. The whole point of term insurance is income replacement — once you retire and your kids are independent, you don't need it anymore. Plans extending to 75 or 80 cost significantly more for marginal benefit.

Term Insurance Buying Guide: How Much Cover, Which Insurer, Which Riders

Term insurance is the simplest, cheapest, and most important insurance product you'll ever buy. For ₹15,000–25,000 per year (in your 30s), you can secure ₹1–2 crore of cover that pays out if you die during the policy term. Pure protection — no investment, no maturity benefit, no complications.

Yet most Indians either don't buy term insurance at all or buy a savings-linked LIC plan thinking it's the same thing. This guide is the structured version of how to buy term insurance correctly.

Why term over endowment / ULIP / whole life

Insurance and investment should never be combined.

A typical LIC endowment plan: pay ₹50,000/year for 20 years, get ₹15 lakh cover, ₹12–15 lakh maturity. Effective return: 4–5%.

Equivalent strategy: ₹15,000/year for ₹1 crore term cover (8× more protection) + ₹35,000/year invested in index funds. After 20 years, the investment grows to ₹17–22 lakh. Better cover AND better returns.

Term insurance separates the two functions properly. Buy term, invest the rest.

Step 1: calculate the right sum assured

Three components:

Income replacement: 10–15× your current annual gross income
All outstanding loans: home, car, personal, education
Future major expenses: kids' education (~~₹50 lakh per child), marriage if you fund it (~~₹20–30 lakh)

Subtract: existing liquid investments your family could access.

For most professionals in their 30s with a home loan and one kid, the right number lands between ₹1.5 crore and ₹3 crore. Calculate, don't guess.

Step 2: choose the right tenure

Cover until retirement age (60 or 65). Not longer.

The point of term insurance is income replacement. Once you retire:

Kids are typically financially independent
Loans are typically paid off
Your retirement corpus has built up
Your spouse has their own savings

Extending to age 75–80 inflates premium for benefit you mostly won't need. Buy lean, redirect savings to investments.

Step 3: pick a trustworthy insurer

Three metrics to check on IRDAI's annual report:

Claim Settlement Ratio (CSR): % of claims settled by count. Target: 95%+.

Claim Settlement Amount Ratio: % of claims settled by rupee value. This catches insurers who pay small claims but reject big ones.

Solvency Ratio: insurer's financial cushion. IRDAI requires 1.5; safe insurers run 2.0+.

Tier 1 (very safe): LIC, HDFC Life, ICICI Prudential, Max Life, Tata AIA, SBI Life.

Avoid: insurers with CSR below 92% or Solvency below 1.7.

Step 4: skip the toxic riders, keep the useful ones

Riders are add-ons. Most are bad value; a few are worth it.

Worth buying:

Critical illness rider: pays a lump sum if diagnosed with one of 30–50 listed conditions. Useful supplement to health insurance for income loss during long treatment.
Accidental death benefit: usually small premium for additional 50–100% payout in accident-caused death.

Skip:

Premium waiver on disability — useful but often overpriced
Hospital cash riders — duplicate of health insurance
Return of premium — destroys economics of pure term

Step 5: declare everything honestly

The single biggest reason term claims get rejected is non-disclosure: not declaring smoking, not declaring pre-existing conditions, lying about income or occupation.

Rule: declare everything, even if it raises your premium. A 30% premium increase is annoying. A claim rejection 15 years later is catastrophic for your family.

Insurers cross-check declared income against ITR, and medical history against electronic health records. They WILL find inconsistencies.

Step 6: when to buy

Buy as young as possible. Premium is locked in at age of purchase.

A ₹1 crore, 30-year term plan:

At age 25: ~₹8,000/year
At age 30: ~₹12,000/year
At age 35: ~₹17,000/year
At age 40: ~₹25,000/year

The same cover taken 5 years later costs 50% more — every year, for the entire policy duration. The cost of waiting is enormous.

Common mistakes to avoid

Underinsuring: ₹50 lakh cover when family needs ₹2 crore. Tightest possible cover usually = inadequate.

Overpaying for ROP: 2–3× more premium for "return of premium" wipes out the math. Pure term + invest the difference always wins.

Not increasing cover after life events: marriage, kids, home loan all justify upping cover. Many insurers offer "increasing cover" options at policy purchase.

Buying multiple small policies instead of one large one: small policies often have higher per-rupee cost. One large policy from a top insurer is cleaner.

Ignoring health declaration: smoker who declares as non-smoker risks claim rejection. Tell the truth.

What to read next

Health insurance buying guide India — the other essential protection product.
Emergency fund sizing — your first layer of financial protection.
Best ELSS funds 2026 — where to invest the savings from buying term over endowment.
How to save tax legally in India — using 80C and 80D effectively alongside term insurance.

Term insurance feels like spending money on something you hope to never use. That's exactly the right framing. The years you pay premium and don't claim are the best possible outcome — they mean you're alive, your family is intact, and you've quietly bought peace of mind for the price of a monthly meal out.