What is Term Insurance?

Term insurance is a pure life insurance policy that provides financial protection for a specific period. If the policyholder passes away during that term, the insurer pays a lump sum death benefit to their beneficiaries. Multiple insurers sell various term insurance policies in the market.

At TruPath, our top recommendation is the Axis Max Life Smart Term Plan Plus, which offers features such as a critical illness rider for up to 20 years, an accelerated terminal illness benefit of ₹1 crore, and more. A 25-year-old individual seeking ₹2 crore coverage up to 65 years pays ₹17,222 annually for this plan.

But before you check out this product and other recommended plans, it's important to know more about the best term insurance plans. This guide is for those who want to know what is term insurance.

India’s life insurance market is growing, and the latest numbers are proof. according to India's Insurance Annual Report 2024-25, the average premium per person, or insurance density, rose to USD 97 in FY 2025 from USD 95 in FY 2024. Life insurance density also increased, reaching USD 72, up from USD 70 the previous year.

Amid this expanding market, term insurance stands out as a simple, cost-effective way to ensure your family’s financial security. It is the simplest form of life insurance: you pay a fixed premium for a fixed period, and if you pass away during the policy term, your nominee receives the sum assured. Let’s discuss the features of term insurance, its types, premium comparison, and other details.

What is Term Insurance?

Term insurance provides financial protection to your family if you pass away during the policy term. It ensures that your dependents can maintain their lifestyle, pay off debts, cover living expenses, and meet future goals such as education or retirement without being financially burdened.

Types of Term Insurance

The infographic below can help you understand the different types of term insurance in detail.

Key Insights:

• We recommend level term insurance as the default option because it provides a fixed life cover at an affordable premium throughout the policy term.
• Increasing cover, zero cost exit, and housewife term plans can be considered only when they fit a specific need or profile.
• We don’t recommend return of premium, decreasing term insurance, or whole life term insurance because they either cost much more, reduce coverage over time, or extend coverage beyond the years when your family actually depends on your income.
• Group term and joint term insurance should not be your primary protection plan because employer- or bank-linked covers can end at any time, and joint covers may have payout and rider limitations. Separate individual term plans usually offer cleaner and more reliable protection.

Term Insurance Riders: Adding Extra Cover to Your Policy

Riders are optional add-ons that enhance your base term plan. You pay an additional premium for each rider you add. Not all riders are equally useful, so choose only what your situation actually calls for.

Take a look at the below infographic to understand the popular term insurance riders you can opt for or avoid based on your needs:

How Much Term Insurance Cover Do You Actually Need?

At TruPath, we recommend an expense and liability based approach. Your cover should be enough to help your family maintain their lifestyle, repay outstanding loans, and fund major future goals like children’s education, even if you are not around.

The easiest way to estimate this is through our term insurance calculator. Enter your age, the number of years your family needs protection, monthly expenses, outstanding loans, and any existing life insurance cover. The calculator will give you a more practical estimate based on your actual responsibilities, not just your income.

Note: If you opt for higher coverage, insurers conduct stricter financial and medical underwriting. At TruPath, we recommend not skipping any test. Even if your policy application is declined, early clarity helps you plan and avoid future claim complications.

If you already have an existing life insurance cover, you should deduct the death sum assured from the recommended coverage. You should also declare it while purchasing a new term plan. This helps ensure you’re adequately insured without over-insuring or paying unnecessary excess premiums.

How to Decide the Right Term Insurance Plan for You?

Choosing term life insurance involves selecting a financially reliable insurer and a policy that aligns with your income, dependents, loans, and long-term family goals.

At TruPath, we rate plans using publicly disclosed metrics like Claim Settlement Ratio (CSR), Amount Settlement Ratio (ASR), solvency ratio, complaint volume, and premium affordability. Based on these checks, Axis Max Life is a strong pick, with a 99.62% average Claim Settlement Ratio (CSR) and 96.37% Amount Settlement Ratio (ASR) across FY 2022-25.

Term Insurance vs. Life Insurance: What's the Difference?

Term life insurance is a type of pure-protection life insurance that provides a death benefit if the policyholder passes away during the policy term. Conversely, life insurance is a broader category that includes policies that combine savings or market-linked investment with insurance and can provide a payout at maturity if you survive.

How Much Does Term Insurance Cost?

Term insurance premiums depend primarily on your age, gender, smoking status, health profile, coverage amount, and policy term. The earlier you buy, the lower your premium, and that rate stays locked for the full policy term.

Tax Benefits of Term Insurance

There are three major term insurance tax benefits in India:

• Tax deductions up to ₹1.5 lakh on premiums paid under Section 80C (old tax regime).
• Tax-free payouts to nominees under Section 10(10D), regardless of regimes.
• Tax deductions on premiums paid under certain riders, like critical illness, within the Section 80D limits (old regime).