The job of term insurance
Term insurance does one thing: pay a lump sum to your family if you die during the policy period. No maturity benefit, no investment return, no fancy features. The simplicity is the point.
A ₹1 crore cover for a 30-year-old non-smoker male costs roughly ₹11,000 per year. That is ₹30 per day to give your family the financial cushion to replace 10-15 years of your income if something happens to you.
The age math is unforgiving
Every year you delay buying term insurance, the premium goes up roughly 8-10%. Locking in at age 25 means paying that low rate for the entire term. Locking in at 35 means paying that higher rate for the entire term.
A ₹1 crore cover for 30 years bought at age 30 costs roughly ₹11,000/year. The same cover bought at age 40 costs roughly ₹24,000/year, with a shorter term to age 60-65 typically possible. Over the policy life, that is ₹3-4 lakh in extra premiums.
Smoker premiums are brutal
Insurers price tobacco use as a major mortality risk. A 30-year-old male smoker pays roughly 55-60% more than a non-smoker for the same cover. The same goes for declared alcohol use beyond moderate levels.
Critically: do not lie about smoking on the proposal form. Insurers test for cotinine (nicotine metabolite) during medicals. If they find evidence of tobacco use you did not disclose, the claim gets repudiated. Be honest, pay the higher premium, get a policy that actually pays.
If you quit smoking for 12-24 months, you can apply for a premium revision with proof of non-smoking status. Some insurers reduce premiums on re-underwriting.
Where to buy: online vs offline
Online term insurance (bought directly through the insurer’s website) is roughly 30-40% cheaper than agent-sold policies. The insurer saves on commission and passes it on.
LIC Tech Term, HDFC Click 2 Protect Super, Max Life Smart Secure Plus, Tata AIA Sampoorna Raksha Supreme, ICICI Pru iProtect Smart: all available online with similar pricing for the same cover profile. Use the claim settlement ratio from IRDAI’s annual report to choose between them.
Cover amount: the 10x rule isn’t enough
Standard advice says “buy 10x your annual income.” That works for someone with no dependents or debts. For most working Indians with families, the right number is higher:
- Outstanding home loan + car loan + personal loans = total debt
- Children’s education + marriage expenses (inflation-adjusted)
- Spouse’s living expenses × 25 years (using current annual expenses × 25 for inflation buffer)
- Subtract existing investments and assets
For a 32-year-old earning ₹20 lakh, with ₹50 lakh outstanding home loan, two kids and ₹20 lakh in investments: required cover is roughly ₹3 crore, not ₹2 crore.
The 80C and 10(10D) tax angle
Premium up to ₹1.5 lakh per year qualifies for Section 80C deduction under the old tax regime. New regime does not offer 80C, so the premium becomes a pure expense.
The death benefit your family receives is fully tax-exempt under Section 10(10D), regardless of regime. This is one of the few investment-or-insurance products with both contribution-side (old regime) and payout-side tax benefits.
Riders worth adding
Three additions consistently justify the extra premium:
Critical illness rider: Pays a lump sum on diagnosis of major illnesses like cancer, heart attack, kidney failure or stroke. Costs ₹2,000-4,000/year for ₹25-50 lakh cover. Useful because medical costs in India have risen sharply and treatment for major illnesses can run ₹15-30 lakh.
Accidental death benefit: Doubles the cover amount if death is due to accident. Costs ₹500-1,000/year. For someone who drives or rides a two-wheeler in Indian traffic daily, this is cheap protection.
Waiver of premium on disability: If you become permanently disabled, all future premiums are waived but the policy continues. Costs ₹500-1,000/year. Disability is statistically more common than premature death for working-age adults.
Skip “return of premium” variants. They double or triple the base premium and only return your money at the end if you survive. Mathematically you are much better off buying pure term and investing the difference.
What can go wrong with claims
Term insurance has the simplest claim process of any insurance product, but it can still go wrong. Common reasons for claim rejection:
- Non-disclosure of pre-existing conditions: If you had diabetes or hypertension at policy purchase but didn’t declare it, the insurer may reject.
- Hidden tobacco/alcohol use: As above, cotinine and liver enzyme tests can reveal undeclared use.
- Death within the 3-year contestability window: Insurers can investigate any death in the first 3 policy years. After 3 years, claims cannot be rejected for non-disclosure (Section 45 of Insurance Act).
- Suicide in first year: Most policies exclude suicide for the first 12 months.
The fix is honest disclosure on the proposal form. If anything is later disputed, an honest declaration on file is your strongest defense.
When to revisit your policy
Buy once, increase if needed. Recommended trigger events:
- Salary doubles (cover needs to scale)
- New child or dependent
- New major loan (home loan over ₹50 lakh)
- Quit smoking for 24+ months (re-underwrite for lower premium)
Do not surrender an existing policy to buy a new one with the same insurer: you lose the locked-in age band. Instead, layer a second policy from a different insurer if you need more cover.