Quick Overview
Most of us insure our phones, our cars, and even our travel plans. But when it comes to insuring the one thing that actually pays for everything, our income, many people either delay it or skip it altogether.
However, delaying term insurance can be a costly mistake, and we say that quite literally. A term insurance plan is designed to protect your family financially if something were to happen to you. It doesn’t offer fancy returns or complicated investment features.
In this guide, we break down what are the benefits of term insurance, how it works in real life, and why it is considered the foundation of any solid financial plan.
What are the Benefits of Term Life Insurance?
1) Financial Security for Your Family
Term insurance protects your family from financial hardship by replacing your income if you’re no longer around. It helps them manage daily expenses and maintain their lifestyle without dipping into savings or taking on debt.
2) High Life Cover at an Affordable Premium
One of the biggest benefits of term life insurance is how much coverage you get for how little you pay.
3) Cost Comparison With Other Life Insurance Plans
Traditional life insurance plans that combine insurance + investment (like ULIPs or endowment plans) make death benefits more complicated and often less efficient than they appear on paper.
For example, in HDFC Life Sampoorn Nivesh Plus (Classic Benefit option), a 30-year-old buying a ₹20 lakh cover pays ₹1 lakh every year for 10 years (total ₹10 lakh).
- If he survives the policy term, his maturity value depends on market returns (around ₹18 lakh at 4% returns or ₹87 lakh at 8% returns).
- If he dies during the policy term, his family only gets the higher of ₹20 lakh or the fund value.
Despite paying ₹10 lakh in premiums, the guaranteed protection for the family remains just ₹20 lakh, and even that depends on multiple conditions like fund value and withdrawals.
In contrast, a pure term insurance plan would offer a much higher fixed cover (like ₹1 crore or more) at a fraction of this cost, with no confusion about payouts.
No savings component. No investment layer. Just high coverage. For example, a 25-year-old non-smoker male can get a simple ₹2 crore cover (ICICI Prudential iProtect Smart Plus) till age 70, around ₹17,000 p.a.
Since insurers only pay if death occurs during the policy term, the risk is lower for them. This allows them to offer large cover amounts (₹50 lakh, ₹1 crore, or more) at very low premiums, often less than the cost of a monthly OTT subscription.
Estimated Premiums of Top Term Insurance Plans
Key Insights:
- At age 25, a ₹1 crore cover can cost as low as ₹10,020 per year (≈ ₹835/month). This is based on Bajaj Allianz eTouch II, the cheapest option in the table.
- Premiums increase by 30–40% every 5 years on average.
- By age 40, the same cover costs almost double across most insurers.
4) Helps Pay Off Loans and Liabilities
Most families today run on borrowed money, home loans, car loans, personal loans, or education loans. Term insurance protects your family from inheriting your loans by providing funds to repay EMIs and outstanding debts.
5) Flexible Coverage and Policy Options
Modern term insurance plans let you choose your coverage amount, policy duration, and how your family receives the payout (lump sum, monthly income, or both). You can also add riders like critical illness or disability cover for extra protection.
Tax Benefits of Term Insurance
Term insurance also helps you save tax; premiums qualify for deduction under Section 80C, and the death benefit is completely tax-free under Section 10(10D). Health-related riders can offer extra deductions under Section 80D.
Additional Protection Through Riders
Accidental Death Benefit Rider
Provides an extra payout if death occurs due to an accident, offering added security for families of frequent travelers or those in high-risk jobs. However, we at Ditto do not recommend it; we suggest amping up your base cover instead because it offers a payout in case of accidental deaths also.
Critical Illness Rider
Pays a lump sum if you are diagnosed with a listed serious illness like cancer, heart attack, or kidney failure. This helps cover treatment costs and income loss.
Waiver of Premium Rider
If you become permanently disabled or critically ill, future premiums are waived while your policy continues. This prevents your coverage from lapsing when you need it the most.
Accidental Total & Permanent Disability (ATPD) Rider
Provides a lump sum payout if you become totally and permanently disabled due to an accident and are unable to work again. This money can be used to manage long-term living expenses, medical care, or lifestyle adjustments when your regular income stops.
Terminal Illness Rider
Allows you to receive a portion (or sometimes the full amount) of the sum assured in advance if you are diagnosed with a terminal illness with a limited life expectancy. This helps cover medical costs and lets you plan your finances with dignity during a difficult phase.
Benefits of Buying Term Insurance Early
Timing plays a huge role in how effective your policy is.
1) Lower Premiums at a Young Age
The younger and healthier you are, the cheaper your premiums. Locking in early means paying low rates for decades.
2) Longer Coverage Period
Buying early allows you to stay protected through your most financially sensitive years; career growth, marriage, children, and loans.
3) Reduced Risk of Policy Rejection
Health issues increase with age. Buying early reduces medical complications and the chances of rejection or higher premiums.
Why Choose Ditto for Term Insurance?
At Ditto, we’ve assisted over 8,00,000 customers with choosing the right insurance policy. Why customers like Aaron below love us:
- No-Spam & No Salesmen
- Rated 4.9/5 on Google Reviews by 15,000+ happy customers
- Backed by Zerodha
- 100% Free Consultation
You can book a FREE consultation. Slots are running out, so make sure you book a call or WhatsApp us now!
Conclusion
The benefits of term insurance go far beyond just a payout. It protects your family’s income, lifestyle, home, and future goals, all at an affordable cost. With flexible options, strong tax benefits, and rider-based customization, term insurance remains the most efficient way to secure your family financially.
If your family depends on your income in any way, purchasing term insurance moves beyond optionality. It’s essential.
Frequently Asked Questions
Last updated on:
