Term Insurance

Term insurance is a pure-protection life insurance policy that pays the nominee a lumpsum (the sum assured) if the life assured dies during the chosen term. If the life assured survives the term, there is no maturity payout — which is the central design feature and the reason the premium is a small fraction of savings-linked products with similar death benefits. Term plans are widely used in India by working-age earners with financial dependents because the cost of a large death cover is affordable relative to income.

Worked example: a 30-year-old non-smoker buying a ₹1 crore pure-protection term plan with a 30-year term typically pays in the indicative range of ₹10,000 to ₹14,000 annually as level premium. A similar nominal death cover structured as an endowment or money-back plan usually costs significantly more per year, because those products combine protection with a savings or bonus-accrual component. Which structure suits a given buyer depends on their goals — pure-protection term focuses the premium entirely on death cover, while savings-linked products produce a maturity pay-out under the contracted scenarios.

A common misconception is that term insurance is 'wasted money because you get nothing back if you survive'. That framing inverts the logic — the product is designed to protect against an adverse outcome (premature death) that the buyer hopes never happens, much like motor or health insurance. Another common misconception is that online term plans have weaker claim settlement records than offline ones.

Publicly available IRDAI claim settlement data suggests comparable or better settlement ratios for large online insurers, partly because online proposals are filled by the customer directly (reducing agent-led mis-declaration, a recognised cause of claim rejections). What matters more is complete and accurate disclosure on the proposal form, the length of the policy term (often chosen until age 60 to 65 or through the last large liability), and whether the buyer opted for critical illness and waiver-of-premium riders. Related: sum assured, whole life insurance, endowment plan.