Which is the better insurance: LIC or term insurance?

I have written several articles about LIC this past week, and I’ve been getting many queries about it.

(P.S. Here’s a quick look at our queue of LIC articles and what our in-house experts say about the brand!)

Is LIC a Good Term Insurance Plan?

One of the most common questions I get is, ‘Which is better insurance: LIC or term insurance?’ So, in this article, I’ve decided to clarify things, explain the differences, and tell you which one is better, depending on your needs.

Friendly reminder: It’s easy to get lost comparing policies and premiums. Instead of spending hours on it, why not get personalized insurance advice from Ditto? We offer free consultations with zero spam! Just book a call to clarify all your doubts.

Overview: Clearing the Confusion Between LIC or Term Insurance

Many people in India consider "LIC" and "term insurance" mutually exclusive. But this is a misconception. LIC, or Life Insurance Corporation of India, is an insurance company. Term insurance, on the other hand, is a product category. In fact, LIC itself offers term insurance plans along with other life insurance products. The real decision you need to make is not LIC vs term insurance, but instead whether you should opt for LIC's plans or consider term insurance products from private insurers. This article clears the confusion and helps you make a more informed choice.

What is LIC (Life Insurance Corporation of India)?

LIC is a public sector life insurance company owned by the Government of India. Established in 1956, it has become synonymous with life insurance in the country. Over the decades, LIC has built a reputation for trust and reliability. It offers a wide array of insurance products, including traditional savings-cum-protection plans like endowment policies, money-back policies, whole life plans, ULIPs, pension plans, and yes, even term insurance. Its vast network of physical agents and branches, especially in semi-urban and rural areas, adds to its reach.

LIC offers a broad spectrum of life insurance products, including many traditional policies. These include:

Endowment Plans: Combine life cover with a savings or investment component.
Money-Back Plans: Provide periodic returns during the policy term.
Whole Life Plans: Offer lifetime coverage with a maturity benefit.
Unit-Linked Insurance Plans (ULIPs): Combine market-linked investment with life insurance.
Pension/Annuity Plans: Designed for retirement income.

What Is Term Insurance?

Term insurance is a pure protection plan that provides financial security to your loved ones in case of your untimely demise. You pay a premium for a specific term (say, 30 years), and if something happens to you during that period, your nominee receives the sum assured. There are no maturity or survival benefits — unless you opt for a return of premium variant, which is more expensive and, honestly, not needed.

Term insurance is the most efficient and affordable way to get high life coverage. This is why LIC has also recently started offering term insurance.

Top Term Insurance Plans from LIC (Life Insurance Corporation of India)

The Life Insurance Corporation of India has two term insurance plans. Here, we have summarized them into a neat table:

Feature	LIC Digi Term (Plan 826)	LIC New Tech Term Plan
Entry Age	18 – 45 years	18 – 65 years
Maximum Coverage Limit	40 years or age 75 (whichever is earlier)	40 years or age 85 (whichever is earlier)
Minimum Qualification	12th standard	12th standard
Premium-Payment Options	Single-pay, Regular-pay, 10-pay, 15-pay	Single-pay, Regular-pay, Limited-pay (premiums finish 5 or 10 years before term ends)
Payment Frequencies	Half-yearly or Annual (no monthly/quarterly)	Half-yearly or Annual (no monthly/quarterly)
Basic Sum Assured	₹50 lakh – ₹5 crore	₹50 lakh & upward (no stated ceiling; subject to underwriting)
Benefit Variants	• Level Cover – does not increase, • Increasing Cover: 0-5 yrs level, then +10 % of original S.A. each year (yrs 6-15) to 2× base from yr 16	• Level Cover (flat) – does not increase, • Increasing Cover: identical step-up pattern as Digi Term
Optional Riders	None	Accident Benefit Rider (extra sum assured on accidental death; active only while premiums are being paid or up to age 70)

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Best Term Insurance Plans in India from Other Top Term Insurance Providers

Here are the top term insurance plans that we usually recommend at Ditto:

Best Term Insurance Plans in India (if you’re under 65)	Features	Drawbacks
Axis Max Life Smart Term Plan Plus	Critical Illness benefits, Total and Permanent Disability rider, Zero Cost (Special Exit option), Waiver of Premium	No top-up option, No option to boost your cover as per the inflation rate
HDFC Life Click2Protect Super	Critical Illness Benefit, Total Permanent Disability Benefit, Zero Cost Option, Waiver of Premium, Inflation Protection, Accidental Death Benefit	Pricier than the other plans in its category
Bajaj Life eTouch II	Return of Premium, Terminal illness, Accidental Death Benefit Rider, Inbuilt Waiver of Premium on ATPD, Zero Cost (Early Exit option), Critical Illness Benefit	No waiver of premium if you’re diagnosed with a critical illness
ICICI Prudential iProtect Smart	Smart Exit Benefit, Accelerated Critical Illness Benefit, Inbuilt Waiver of Premium on Accidental Disability, Terminal Illness, Life stage Benefit	No waiver of premium if you’re diagnosed with a critical illness
Tata AIA Sampoorna Raksha Promise	Waiver of Premium, Accidental Death Benefit, Critical Illness Rider, Total and Permanent Disability Rider, HospiCare Benefit	No Zero Cost available (In Non-ROP variant)

LIC vs. Top Term Insurers in India

Now that you’ve seen the policies themselves, let’s take a closer look at how the insurers fare against the industry averages:

Metric (Avg of 2021-24)	LIC	Axis Max Life Metrics	HDFC Life	Bajaj Allianz	Industry Metrics
Claim Settlement Ratio (Avg of 2021-24)	98.55%	99.50%	99.20%	99.11%	Mean: 98.13%
Solvency Ratio (Avg 2021-24)	1.9	1.9	1.89	5.1	Mean: 2.0(IRDAI specifies a minimum of 1.5 is acceptable)
Complaint Volume (Avg 2021-24) (per 10,000 claims)	7.3	7.3	2	4.4	Median: 15
Amount Settlement Ratio (Avg of 2021-24)	95.50%	96.20%	93.90%	93.50%	Mean: 94.17%
Total Business Volume (Avg of 2021-24)	₹2,17,726 crores	₹9,296 crore	₹27,490 crore	₹10,456 crore	Median: ₹3,019 crore
Amount Paid in Claims (Avg of 2021-24)	₹21,556 crore	₹1,501.8 crore	₹1,860.7 crore	₹663.4 crore	Median: ₹253.58 crore

As you can see, LIC has the highest business volume. So much so that it’s over 4 times more than the remaining three put together. So, naturally, they also paid the highest amount in claims (in terms of absolute numbers). However, LIC has a slightly lower CSR & ASR, and a significantly higher complaint volume. This, coupled with subpar digital initiatives, is why we do not recommend LIC to our customers.

Still, a lot of people say that LIC enjoys sovereign backing due to government ownership. However, it is important to clarify that no life insurance company, including LIC, offers explicit sovereign guarantees. All insurers are regulated strictly by the Insurance Regulatory and Development Authority of India (IRDAI). The IRDAI mandates a minimum solvency ratio of 150% to ensure financial soundness. Most insurers comfortably maintain a solvency ratio between 180% and 220%. In the unlikely event of an insurer facing trouble, the IRDAI intervenes to protect policyholders' interests, often by merging distressed insurers with healthier companies.

Why Talk to Ditto for Your Term Insurance?

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Conclusion

There you have it, folks. LIC is not a type of insurance — it’s an insurance company. LIC also offers term insurance, just like other insurers. The real decision is whether to opt for LIC’s traditional policies, LIC's term plans, or a term plan from a private insurer. If you’re looking for the most cost-effective way to secure your family’s future, term insurance is the way to go. It’s ideal for young professionals, parents with children, or anyone with financial dependents.

The premium is lower, and the coverage is high. This makes term insurance the best tool to protect your family from income loss in case of death. You can then invest the remaining money (which you would’ve otherwise spent on an endowment policy) in mutual funds or other investment vehicles to generate a return.

Last updated on: 20 Jan, 2026