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:

Plan Names	Coverage and Riders	Ditto Rating
Axis Max Life Insurance Smart Term Plan Plus	Accidental Death Benefit, Critical Illness Cover (up to 64 illnesses), Regular or Smart Cover (1.5X coverage for first 15 years), Women's Perks (Lifeline Plus & Discounts), Waiver of Premium on Disability or Critical Illness, Zero-Cost Exit Option, Terminal Illness Benefit	4.6/5
HDFC LIFE Click 2 Protect Supreme Plus	Accidental Death Benefits, Disability & Critical Illness Premium Waiver, Accidental Total & Permanent Disability rider, Inflation-linked cover increase, Critical Illness Cover (60 illnesses), Terminal Illness Benefit, Premium Break, Education Income Benefit, Spouse Cover option, Zero-cost Smart Exit, Instant Claim Payout	4.5/5
ICICI Prudential iProtect Smart Plus	Accidental Death Benefits, Life Stage Benefit (increased coverage after milestones like marriage/childbirth/home loan), Terminal Illness Payout, Critical Illness Cover (60 illnesses), Zero Cost Option	4.3/5
Bajaj Allianz Life eTouch II	Accidental Death Benefits, Life Stage Benefit (increased coverage after marriage/childbirth), Critical Illness Coverage (60 illnesses), Terminal Illness cover, Waiver of Premium on Accidental Total & Permanent Disability, Zero Cost Option	4.2/5
Aditya Birla Sun Life Super Term Plan	Inbuilt Accelerated Critical Illness Benefit + premium waiver on diagnosis, Terminal Illness payout (inbuilt), Waiver of premium on Accidental Total & Permanent Disability, Life Stage Flexibility, Cover Continuance (premium deferment up to 12 months), Early Exit Value (specific age/tenure bands)	4/5

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	LIC	HDFC Life	Axis Max Life	ICICI Pru	Bajaj Allianz	Industry Average
Claim Settlement Ratio (Avg FY22–25)	98.35%	99.55%	99.62%	98.03%	99.21%	98.66%
Amount Settlement Ratio (%) (Avg FY21–24)	95.51%	93.90%	96.20%	95.11%	93.56%	94.88%
Annual Business Volumes (₹ Cr) (Avg FY22–25)	227,169	30,560	10,719	19,774	11,508	17,459.29
30-day Claim Settlement (Avg FY22–25)	96.13%	98.93%	99.71%	94.68%	92.45%	97.48%
Amount Paid in Death Claims (₹ Cr) (Avg FY22–25)	19,017.6	1,678.1	1,316.2	1,876.8	693.7	1,260.38
Complaints per 10,000 Claims (Avg FY22–25)	4.57	1.33	5.67	11.00	3.95	51.72
Solvency Ratio (Avg FY22–25)	2.00	1.94	1.88	2.05	4.37	2.32

From the data, LIC clearly dominates in scale, with annual business volumes and death claim payouts vastly exceeding its peers, reflecting its deep market penetration and trust. While private insurers like HDFC Life, Axis Max, and Bajaj Allianz slightly outperform LIC in claim settlement ratios and 30-day claim settlement, LIC still maintains competitive performance (98.35% CSR, 96.13% settled within 30 days) above the industry average. Complaints per 10,000 claims are strikingly lower for HDFC Life (1.33) and Bajaj Allianz (3.95) compared to LIC (4.57), suggesting better customer experience in some private players. All follow IRDAI’s 150% (1.5x) solvency mandate. Most private term insurers maintain ratios between 1.88 and 2.05, while Bajaj Allianz excels at 4.37.

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: 2 Mar, 2026