The one insurance policy every earning Indian needs and most don't have
Imagine this: you earn, you provide, and your family depends on you. But what happens to them financially if you're suddenly not there? It's an uncomfortable thought but ignoring it is far more dangerous. Term insurance is the simplest, cheapest, and most powerful answer to that question. Here's everything you need to know.
INSURANCE
The one insurance policy every earning Indian needs and most don't have
Vikram is 31, works in Pune as a marketing manager, earns ₹70,000 a month, and has a home loan, a 3-year-old daughter, and ageing parents who depend on him. He has a health insurance policy and a couple of SIPs running.
What he doesn't have is a term insurance plan.
"I'll get to it," he says. Most people say that. Then life happens a health scare, a diagnosis, or something far worse and the conversation becomes too late.
Term insurance isn't about dying. It's about making sure the people who depend on you can live with dignity, without debt, and without financial panic, even if you're not around.
What exactly is term insurance?
Term insurance is the purest, simplest form of life insurance. You pay a fixed premium every year for a chosen period say 30 or 40 years and if you pass away during that period, your nominee receives the full sum assured (the cover amount) as a tax-free lump sum.
No investment component. No maturity benefit. No returns if you survive. And that's precisely what makes it powerful and affordable.
Because there's no savings or investment element built in, the entire premium goes toward providing life cover. This is why a healthy 30-year-old can get ₹1 crore of life cover for as little as ₹800–₹1,000 per month roughly ₹27 a day.
How much cover do you actually need?
A widely used thumb rule is 10 to 15 times your annual income. If you earn ₹8 lakh per year, your target cover should be ₹80 lakh to ₹1.2 crore.
But income replacement is only the starting point. A more complete calculation also factors in:
Outstanding liabilities: home loan, car loan, personal loan balances that your family would inherit.
Future goal funding: your child's education (₹30–50 lakh in today's value), their marriage, and other milestones.
Income replacement period: how many years your family would need to be financially independent without your income.
Existing assets: EPF balance, savings, investments already in place that reduce the gap.
A simple formula used by financial planners: Human Life Value (HLV) = (Annual income × Years to retirement) + Liabilities + Goals − Existing assets.
When should you buy it?
The single best time to buy term insurance is as early as possible, ideally in your mid-to-late 20s.
Here is why: term insurance premiums are locked in at the rate applicable to your age and health at the time of purchase. A 25-year-old non-smoker in good health might pay ₹700-₹800 per month for ₹1 crore cover over 35 years. The same cover purchased at 35 could cost ₹1,200-₹1,500 per month, nearly double.
Every year you delay, premiums rise and the chances of a medical condition affecting your eligibility increase.
What to look for when choosing a term plan
Not all term plans are equal. Here are the five things that matter most:
Claim Settlement Ratio (CSR): This is the percentage of claims an insurer paid out of the total claims received in a year. Look for insurers with a CSR of 98% or above. IRDAI publishes this data annually on its website.
Sum Assured: Choose cover that genuinely replaces your financial role in the family not just a round number that feels comfortable.
Policy Term: Cover yourself until at least age 60–65, ideally until retirement. A 30-year-old should look at a 30 to 35-year term.
Premium Payment Mode: Annual premiums are slightly cheaper than monthly. Choose what your cash flow supports but don't let payment inconvenience be the reason you don't buy.
Riders: Optional add-ons that enhance your base cover. The most important ones are Critical Illness Rider (pays a lump sum on diagnosis of serious illness), Accidental Death Benefit Rider (additional payout in case of accidental death), and Waiver of Premium Rider (future premiums are waived if you become permanently disabled). Evaluate riders on need, don't pay for what you don't require.
Term insurance vs. other life insurance products
Many Indians confuse term insurance with endowment plans, money-back policies, or ULIPs. Here is the core difference:
The smarter approach recommended consistently by fee-only financial planners and backed by regulatory guidance, is to separate insurance and investment completely. Buy term for protection, invest separately in mutual funds for wealth creation.
A practical note on going direct vs. through an agent
You can buy term insurance directly from an insurer's website (direct channel) or through an IRDAI-registered agent or broker. Direct online plans are generally 10–15% cheaper because there is no agent commission embedded in the premium.
However, if you are unsure about which plan fits your needs, a fee-only financial adviser or a IRDAI-registered broker (not a commission-based agent with a single company) can provide objective guidance.
The bottom line
Vikram is 31. His daughter is 3. His home loan runs for 20 more years. His parents have no other income. The cost of not having term insurance for his family is potentially catastrophic.
The cost of having it is less than what most of us spend on dining out in a month.
Term insurance is not a product you buy for yourself. You buy it for the people who need you. And the best day to do it is always today because tomorrow, it costs a little more.
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Disclaimer:This article is for educational purposes only and should not be considered insurance, financial, tax, or legal advice. Insurance needs vary based on individual circumstances. Before purchasing a policy, read the policy document carefully, understand the benefits, exclusions, waiting periods, and terms and conditions, and consult a qualified insurance advisor if needed.
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