As the living costs and financial responsibilities rise, ensuring your family’s future has never been more critical. If something were to happen to you, term insurance offers an affordable way to protect your loved ones financially. However, is it the right choice for everyone? This blog breaks down the term insurance benefits to help you decide for yourself.
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Term Insurance Advantages and Disadvantages: Overview
1. What term insurance is and how it works as a pure protection tool
2. A deep dive into term insurance advantages and disadvantages, helping you make an informed decision.
3. The key term insurance benefits from affordable premiums to flexible payouts and tax perks.
4. Insights into whether term life insurance is worth it, and who stands to benefit most
5. An updated list of the best term insurance plans in 2025 to guide your selection.
Whether buying life insurance for the first time or reassessing your financial protection, understanding term insurance benefits and their trade-offs is the first step toward confidently securing your family’s future.
What is Term Insurance?
Term insurance is a simple life insurance product. You pay a fixed premium for a chosen term, and if you pass away during that period, the insurer pays your nominee a lump sum (sum assured). Unless you’ve chosen a Return of Premium (ROP) plan, there are no maturity benefits if you survive the term.
Unlike traditional life insurance, term insurance is not meant for savings or investments. Its core purpose is to replace your income, ensure your family can maintain their lifestyle, and cover financial liabilities such as home loans, education, or day-to-day expenses.
Best Term Insurance Plans in 2025
Note: For premium comparison, we’ve taken the example of a 30-year-old salaried male, non-smoker, living in Delhi, with a 35-year term insured for a sum of ₹1 Cr.
| Insurance Plan | Premiums | Coverage and Riders |
|---|---|---|
| Axis Max Life Insurance Smart Term Plan Plus | First Year: ₹11,960.77* Second Year Onwards: ₹14,071 |
Accidental Death Benefit, Critical Illness Cover (64 illnesses), Regular or Smart Cover (1.5X coverage for first 15 years), Women's Perks (Lifeline Plus & Maternity Cover), Waiver of Premium on Disability or Critical Illness, Zero-Cost Exit Option, No Inflation-linked Top-Up |
| Bajaj Allianz Life eTouch II | First Year: ₹12,568* Second Year Onwards: ₹13,370 |
Accidental Death Benefits, Life Stage Benefit (increased coverage after marriage/childbirth), Critical Illness Coverage (60 illnesses), Critical Illness Rider (60 conditions), Waiver of Premium on Permanent Disability (accident-related), Zero Cost Option |
| TATA AIA Sampoorna Raksha Promise | First Year: ₹11,714* Second Year Onwards: ₹13,000 |
Accidental Death Benefit, Critical Illness Coverage (40 illnesses), Total Permanent Disability, Critical Illness Rider (40 illnesses), Waiver of Premium on Critical Illness/Permanent Disability, Life Stage Benefit, Partial Terminal Illness Payout |
| ICICI Prudential iProtect Smart | First Year: ₹12,909* Second Year Onwards: ₹14,343 |
Accidental Death Benefits, Life Stage Benefit (increased coverage after milestones like marriage/childbirth), Terminal Illness Payout, Critical Illness Cover (34 illnesses), Zero Cost Option, Waiver of Premium on Permanent Disability (accident-related) |
| HDFC LIFE Click 2 Protect Super | First Year: ₹15,498.95* Second Year Onwards: ₹16,315 |
Accidental Death Benefits, Disability & Critical Illness Waiver, Total Permanent Disability, Inflation-linked cover, Critical Illness Cover (60 illnesses, 90-day waiting period), Terminal Illness Benefit, Return of Premium Option. |
Disclaimer: The data is indicative as premiums are subject to periodic revision and vary with age, medical history, smoking/tobacco consumption habits. Please verify the latest premiums for accuracy.
The best plan can vary based on your individual needs, so it’s critical to do personal research or, better yet, speak to one of Ditto’s IRDAI-certified experts and get solid insurance advice. Book a 30-minute call with us today!
Now that we’ve examined the best term insurance plans in India in 2025, let’s look at the term insurance advantages and disadvantages.
What are the advantages of term insurance?
The core purpose of term insurance is to protect the family’s lifestyle and take care of liabilities if the breadwinner dies. It is an essential tool in financial planning, especially for individuals with dependents and ongoing financial obligations. Let’s look at some of the advantages of term insurance.
1) Affordable Premiums for High Coverage:
Term insurance is one of the most cost-effective ways to protect your family’s financial future. For a relatively modest premium, you can secure a life cover many times greater than you pay, offering exceptional value and peace of mind.
For example: A healthy 30-year-old purchasing a ₹2 crore term insurance plan (coverage until age 60) typically pays an annual premium of ₹20,000–₹24,000. That translates to:
- Just 0.1%–0.12% of the total sum assured per year
- A leverage of ₹833–₹1,000 in life cover for every ₹1 paid in premium
In simple terms: You gain 833x to 1,000x coverage for every rupee spent annually, making term insurance an incredibly efficient and affordable to safeguard your loved ones against life’s uncertainties.
2) Multiple Payout Options (Lump Sum, Staggered):
Term insurance provides flexibility in how the death benefit is paid out: policyholders can choose a lump sum, a staggered monthly income, or a combination of both. Families can tailor the payout structure to suit their financial needs and comfort.
| Ditto’s Take: We generally recommend the lump sum option. Why? Because it gives the family immediate access to the full claim amount and offers maximum flexibility. Whether handling urgent expenses, clearing outstanding loans, or investing for future needs, having complete control over the funds is often the most empowering choice. While staggered payouts can promote financial discipline by mimicking a monthly income, the entire amount should be available upfront, especially when the family needs it most. |
3) Rider Benefits (Critical Illness, Waiver of Premium, ATPD):
Riders can be added to improve the base policy by covering risks beyond just death, making your protection more comprehensive and practical.
- Critical Illness Rider: Pays a lump sum on diagnosing specified serious illnesses, helping manage treatment expenses or income loss during recovery.
- Premium Waiver Rider: Waives future premiums if the policyholder is diagnosed with a critical illness or suffers a permanent disability, ensuring the policy remains active even if you cannot pay.
- Accidental Total and Permanent Disability (ATPD) Rider: Offers a payout in case of a permanent disability caused by an accident, providing crucial financial support during a life-altering event.
These riders offer a cost-effective way to strengthen your term plan and address real-life risks affecting financial stability, even before death occurs.
4) Tax Benefits under Section 80C (Old Regime) and 10(10D):
Premiums paid for term insurance qualify for tax deductions up to ₹1.5 lakh under Section 80C of the Income Tax Act (Old Regime). Additionally, the death benefit received by the nominee is tax-free under Section 10(10D), making it a tax-efficient financial product.
5) Simple to Buy and Manage Online:
Term insurance plans are easy to purchase online with minimal documentation and quick processing. Policyholders can compare plans, choose riders, and manage their policies conveniently through digital platforms. Additionally, updating essential details, such as changing nominees or modifying contact information, is straightforward and paperless, helping you keep your policy current without unnecessary delays or hassle.
6) Flexible Duration:
Term insurance allows you to select a policy duration that aligns with your financial journey, ranging from 5 to 40 years, or even up to age 99 in some cases. This flexibility helps ensure your coverage supports key milestones like raising children, repaying loans, and building a retirement corpus.
| Ditto’s Take: We typically recommend choosing coverage until age 60 to 70. By this stage, most individuals have: 1. Repaid major debts 2. Built a sufficient retirement fund 3. Seen their children become financially independent Extending coverage beyond age 70 often isn't financially practical. Premiums rise steeply due to higher mortality risk, and the need for life insurance typically diminishes. Given India’s average life expectancy of about 70 years, the likelihood of a claim increases sharply, making extended coverage less cost-effective. Bottom line: Choose a policy duration that aligns with your financial responsibilities, not just your lifespan. |
7) Premium Payment Term:
Term insurance offers flexibility in how you pay your premiums, allowing you to choose a payment option that best suits your financial situation and goals:
- Regular Pay: Premiums are paid throughout the entire policy term.
- Limited Pay: Premiums are paid over a shorter period (e.g., 5, 10, or 15 years), while coverage continues for the full term.
- Single Pay: The entire premium is paid upfront in one lump sum.
This flexibility helps policyholders match payments to their income patterns and financial plans. For instance, someone planning early retirement or with variable income might prefer limited pay. At the same time, an individual with available surplus funds may opt for a single payment for long-term peace of mind.
By now, it’s clear that term insurance benefits address real financial concerns. But like any financial product, there are drawbacks too.
What are the disadvantages of term insurance?
While term insurance is an effective and affordable tool for providing financial protection to your family in the event of your untimely demise, it is crucial to understand its limitations.
- Stricter Underwriting Criteria – May Exclude High-Risk Individuals: Insurance companies assess risk factors thoroughly. Due to increased mortality risk, individuals who are smokers, have pre-existing medical conditions, or work in high-risk professions may face higher premiums or even policy rejection. This is one of the key disadvantages of life insurance in term form.
- Proof of Income Required: Since term insurance provides large sums assured, insurers require proof of income, such as salary slips, bank statements, Income Tax Returns (ITR), or Form 16, to ensure the coverage is proportionate to the individual's earning capacity.
- Age Restrictions: Most term insurance policies have specific entry age limits, typically between 18 and 65, and a maximum coverage age, often up to 85 or 99 years. As a result, senior citizens or retirees may find it difficult to purchase new term plans, since insurers are less likely to offer coverage beyond certain ages due to higher mortality risks. Moreover, many individuals may no longer need term insurance by this stage of life, as primary financial responsibilities are usually already fulfilled.
- Geographic Limitations: Some insurers have geographic restrictions and may not issue policies to people living outside India or in specific countries/regions deemed high-risk. This can be a limitation for NRIs or frequent expatriates. However, you can still check out some of India's best term insurance plans for NRIs.
- No Maturity or Survival Benefits: If the policyholder survives the policy term, no amount is paid out. Unlike savings or investment-linked insurance products, there is no return of premium or maturity benefit unless you have an add-on, making it unnecessarily expensive.
- No Investment or Wealth Creation Component: Term insurance does not accumulate any cash value over time. There are no dividends, bonuses, or opportunities for partial withdrawals, making it unsuitable for those looking for investment returns or liquidity.
Despite these term insurance disadvantages, the product remains highly relevant, and the term insurance benefits cannot be ignored. Remember that these features precisely allow term insurance to maintain very low premiums. By focusing solely on pure risk coverage without the costs of investment or survival benefits, term plans offer maximum protection at minimal cost, making them an efficient choice for safeguarding your family’s financial future.
Is Term Life Insurance Worth It?
Now that we’ve understood the term insurance advantages and disadvantages, the next question you might ask is, “Is term insurance worth it?” Let’s explore the answer to this question in this section, and hopefully, you’ll have a clearer understanding by the end of it.
Term life insurance is often debated for its lack of returns, but its value lies in its financial protection. If your primary goal is safeguarding your family’s financial future rather than building wealth or earning returns, then term insurance is worth it. It ensures that in the event of your untimely demise, your loved ones aren’t burdened with debt, lifestyle disruptions, or compromised goals.
So, who should consider term insurance?
1) Young Professionals with Dependents:
Depending on their income, individuals in their careers with aging parents, spouses, or children can benefit from affordable, high-coverage term insurance.
2) Parents with Home Loans or Education Responsibilities:
If you have long-term financial obligations like a home loan or future education costs for your children, term insurance can help ensure these commitments are met even in your absence.
3) Single Breadwinners:
For families relying on one income, term insurance acts as an essential safety net to maintain the household’s standard of living and cover ongoing expenses.
4) Anyone Needing Temporary High-Value Protection:
Even if you don't need lifelong coverage, term insurance is ideal during high-responsibility years, when your financial liabilities peak.
So, to answer the question “Is term insurance worth it?” Yes, it is. Term insurance is cost-effective compared to endowment or savings-based life insurance; term plans offer significantly higher coverage for much lower premiums. Moreover, it serves the core purpose of insurance—income replacement and debt coverage, without mixing in investment components that can reduce adequate coverage. Regarding safeguarding your loved ones, term insurance offers the most cost-effective solution, providing substantial coverage and lasting peace of mind.
How to Choose The Right Term Plan? Ditto’s Take
At Ditto, we believe that term insurance is the foundation of every sound financial plan. It’s not about returns—it’s about protection. Choosing the correct term plan ensures that your family remains financially secure even in your absence. Here’s how to approach this critical decision thoughtfully and effectively.
1) Buy Early to Lock in Low Premiums
The earlier you buy, the cheaper it is—because premiums are based on age and health. Locking in a lower premium while you're young and healthy can save you thousands over the policy term, making it one of the most thoughtful early financial decisions.
2) Take Adequate Coverage—Plan for the Future
Don’t just look at your current income. Consider future financial responsibilities like home loans, kids’ education, inflation, and your family's lifestyle. Use the standard rule of thumb (10–20x annual income) as a baseline, but tailor it based on your actual liabilities and goals.
3) Don’t Expect Returns—Buy for Peace of Mind
Term insurance isn't an investment. It’s a safeguard. You’re not buying it for returns but to ensure your loved ones don’t face financial distress if something happens to you. The real return is peace of mind, not money.
4) Prioritize Health Insurance First
Before buying term insurance, ensure you have health insurance in place. Medical emergencies are more frequent and unpredictable. Health insurance covers short-term risks; once that's done, term insurance protects your family's long-term financial security. Here, take a look at the best health insurance plans.
5) Cover Protection First, Then Plan for Wealth
Insurance should be your first step in financial planning, not wealth creation. Once your risks are covered (life and health), move on to:
- Building an emergency fund
- Investing for wealth creation
- Setting up retirement plans
- Planning for legacy or charity
Protecting your income is the first pillar—only then should you focus on growing it.
Buy The Right Term Insurance Plan Through Ditto
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Conclusion: Term Insurance Benefits
While term insurance may not appeal to those seeking investment returns, its real value lies in financial protection. The term insurance benefits far outweigh the costs for most families, offering peace of mind in exchange for affordable premiums. As long as you know the advantages and disadvantages of term insurance, it’s one of the most thoughtful decisions you can make for your family's financial future.
Frequently Asked Questions: Term Insurance Benefits
How much term insurance should I buy?
It depends on age, dependents, income, expenses, and liabilities. For guidance, consult our advisors or use our calculator.
Can I buy Multiple Term Plans?
Absolutely! You can buy multiple term plans if you declare the existing plan details while applying for the new one.
Does term insurance provide returns?
No, traditional term insurance offers pure risk coverage, paying only if the policyholder dies during the term, with no returns or maturity benefits. Return of Premium (ROP) plans refund premiums if you survive the term, but it costs 70–100% more and doesn’t generate real returns—just your premiums back, without growth, and often reduced by taxes. For most, pure term plans provide better value and protection at a lower cost.
Is term insurance better than endowment?
For pure protection, yes. Term plans offer higher coverage at lower costs.
Can NRIs buy term insurance in India?
Yes, but availability depends on the insurer and country of residence.
When should I buy term insurance?
When you're young and healthy, you can get the best rates as early as possible.
What happens if I stop paying premiums?
The policy lapses, and you lose coverage. However, term plans also offer grace periods or revival options.
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