Term Insurance in India: How Much Cover You Need and How to Choose a Plan (2026)

Term insurance is the cheapest way to protect the people who depend on your income. It pays a lump sum to your nominee if you die during the policy term, and nothing if you outlive it. That simplicity is exactly why it is cheap: a healthy 30-year-old non-smoker can often buy ₹1 crore of cover for a premium that is a small fraction of what a savings-plus-insurance policy would cost.

How much cover do you need?

A common starting rule is 10 to 15 times your annual income, but a needs-based calculation is more accurate:

1. Add up your outstanding loans (home, car, personal).
2. Estimate the income your family needs: annual expenses × years until your dependants can support themselves (or until your spouse's retirement).
3. Add future goals: children's education and marriage.
4. Subtract existing savings, investments and any other life cover.

Re-check the figure every few years and when you have a child, buy a house or take a larger loan.

What decides your premium

• Age: the single biggest factor. Premiums rise steeply with age, so buy early.
• Smoking and health: smokers pay roughly 50% to 100% more. Disclose your health history honestly.
• Cover and term: cover to age 60 or 65 is the usual choice.
• Payment mode: annual is cheaper than monthly; limited-pay options (pay for 10 years, covered for 30) exist.
• Occupation and lifestyle: hazardous jobs cost more.

Types of payout

Riders worth considering

• Waiver of premium: future premiums are waived if you become disabled or diagnosed with a critical illness.
• Accidental death benefit: extra payout for accidental death.
• Critical illness: a lump sum on diagnosis. Often better bought separately as health cover.

Every rider adds cost and conditions. Choose only those you understand.

Comparing insurers

Look at the claim settlement ratio (percentage of claims settled in a year; look for above 97%) and the amount settlement ratio (value paid versus claimed), both reported by the insurance regulator IRDAI. Also check the insurer's solvency ratio, the claim process, and customer reviews on how disputed claims were handled. Compare the premium for the same cover, term and riders.

Tax benefits

• Premiums qualify for deduction under section 80C in the old regime, within the ₹1.5 lakh limit. The new regime has no deduction.
• The death benefit paid to the nominee is generally tax-free under section 10(10D).
• GST on individual term-life premiums was removed from 22 September 2025 after the GST Council's decision, which lowers the cost. Check your policy document.

Mistakes that cause claim rejection

• Hiding smoking, drinking, existing illness or other policies in the proposal form. Non-disclosure is the most common reason for rejection.
• Letting the policy lapse by missing premiums (use auto-pay).
• Not telling the nominee that the policy exists, or naming no nominee.
• Buying a return-of-premium plan without comparing: it costs much more and the return is low.

Buying checklist

1. Calculate the cover you need.
2. Buy early, ideally before 35.
3. Cover until retirement age.
4. Fill the form honestly.
5. Keep your nominee informed and documents safe.

Frequently asked questions

How much term insurance should I buy?

Roughly 10 to 15 times your annual income, adjusted for loans, family expenses and goals.

At what age should I buy term insurance?

As early as you have dependants. Premiums are lowest when you are young and healthy.

Is term insurance worth it if I get nothing back?

Yes. It is protection, not an investment, and the premium is low compared with the cover.

Is the claim amount taxable?

Generally no, under section 10(10D).

Why do claims get rejected?

Mostly due to non-disclosure of health or lifestyle facts, or a lapsed policy.

Should I add riders?

Only those you need, such as waiver of premium, and compare costs.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.