Types of Term Insurance in India

One thing we all learn sooner or later is that life rarely follows a script. One moment, you're planning your child’s school admission and the next, you're thinking about retirement. Amidst all this uncertainty, term life insurance plans offer one simple promise: financial protection for your loved ones if you're not around tomorrow.

Term insurance is one of the most affordable and straightforward forms of life insurance. You pay a fixed premium for a specific period (the "term"), and unfortunately if you pass away  during that time, your family receives a lump sum payout. That’s it — no investments, no returns — just pure protection.

However, not all types of term insurance are created equal. Some return your premiums if you outlive the policy. Some offer growing coverage to keep up with inflation. Others are designed specifically for couples or people with home loans.

So, how do you choose?

The key lies in matching your policy to your life stage, financial goals, and the responsibilities on your shoulders. Choosing the right type of term insurance isn’t just about comparing premiums — it’s about making sure your family’s needs are covered when they need it the most.

If you need help choosing the right policy, feel free to chat with us on WhatsApp or book a call at a convenient time. No spam — just honest insurance advice.

What is Term Insurance?

Term insurance is a type of life insurance that offers financial protection for a fixed period — or “term.” If the policyholder passes away during this period, the insurer pays a lump sum (called the sum assured) to the nominee. If the policyholder survives the term, there's usually no payout. It’s simple, transparent, and affordable — exactly what many families need as a safety net.

These term policies are designed to do one job really well — offer high life cover at low premiums so your family can stay financially secure even in your absence.

Now, it’s important to understand how term insurance types differ from other life insurance products like ULIPs (Unit Linked Insurance Plans) or endowment plans. Here’s the key difference:

• ULIPs mix insurance with investment. A part of your premium is invested in market-linked funds (like mutual funds).
• Endowment plans offer a combination of life cover and savings, returning a lump sum if you survive the policy term.
• Whole life insurance provides lifelong coverage (usually up to age 99 or 100), along with a savings component that builds cash value over time.
• Retirement plans help you build a retirement corpus and offer income (pension) post-retirement, while also providing life cover during the policy term.
• Child education plans are designed to financially secure your child’s future — offering payouts at key milestones and ensuring the plan continues even if the parent (policyholder) is no longer around.
• Term policies, on the other hand, focus solely on protection — no savings, no investments — just pure risk cover.

And that’s why term insurance is often considered the most efficient way to secure your family’s financial future without overpaying.

Different Types of Term Insurance in India

There’s no one-size-fits-all when it comes to term life insurance plans. Your ideal policy depends on your income, responsibilities, future goals, and sometimes, even your risk appetite. That’s why insurers offer multiple term insurance types, each tailored to different needs. Let’s break them down:

1. Level Term Insurance

This is the most straightforward and widely chosen type of term insurance. The sum assured stays the same throughout the policy term. The premiums remain fixed — making it predictable and easy to plan for. It is best suited for salaried individuals or anyone looking for a simple protection plan without too many moving parts.

Drawbacks:

• Doesn’t account for inflation — the value of the cover may reduce over time, but this can be overcome by doing a proper inflation-adjusted calculation of the required cover.
• No survival or maturity benefit.

2. Increasing Term Insurance

As the name suggests, the coverage increases every year — usually by a fixed percentage. It is designed to tackle inflation and growing financial responsibilities. While premiums may start slightly higher, the increasing cover offers greater value over time. It is ideal for young policyholders with rising incomes and future family commitments. A lot of increasing term insurance plans also offer a Life Stage Benefit rider that kicks in after a major life event- marriage, first child, etc. This feature increases the total base cover in term insurance.

Drawbacks:

• Premiums are higher than level-term plans.
• Some insurers cap the maximum increase to, say, 5% p.a. up to 100%, limiting flexibility.

3. Decreasing Term Insurance

Here, the sum assured reduces annually — typically aligned with a declining liability like a home loan. The premiums are generally low. It works well if you’re looking to protect a loan, mortgage, or other debts that reduce over time. It is not ideal for long-term family protection but great for loan-specific needs.

Drawbacks:

• Coverage is reduced every year, which is not suitable for long-term family security.
• Offers no flexibility in increasing coverage later. It needs to have pinpoint accuracy in terms of predicting when liabilities will end or start declining.

4. Return of Premium Term Insurance (TROP)

Worried about “losing money” if you outlive your policy? TROP has you covered. If you survive the policy term, all your premiums are refunded. Its premiums are 60-100% higher than standard term plans, but this plan appeals to low-risk-takers who prefer some guaranteed return. It may appeal to conservative investors who want protection and peace of mind.

Drawbacks:

• Premiums are significantly higher than regular term plans.
• Returns aren’t interest-bearing and the GST is not returned back either — your money loses value over time. You would be better off buying a pure term plan and investing that extra amount in a simple FD, which would return a much higher sum.

5. Whole Life Term Insurance

This plan extends protection till the age of 99 or 100 years — essentially covering your entire life. It is useful for those who want to leave behind a legacy or estate for their dependents. Its premiums are higher, but it guarantees long-term coverage. Whole life term plans are best for legacy planning or those with lifelong dependents. If given a choice between opting for a higher cover plan for a shorter duration (say, till age 65 or 70) and a lower cover plan that lasts till age 99, we would generally recommend choosing the former.

This is because the need for financial protection is highest in the earlier stages of life—when income is still being earned, financial responsibilities are at their peak, and family members (like children or a non-working spouse) are most dependent. A higher cover during these crucial years ensures that your family is adequately protected in case of an untimely event.

On the other hand, by the time you reach 70 or beyond, most major liabilities are usually paid off, children may be financially independent, and retirement savings should be in place. In such scenarios, the need for a large life cover naturally reduces.

Drawbacks:

• Premiums are quite high compared to regular term insurance (taken till 60-70 years of age).
• It may be unnecessary if your dependents become financially independent earlier in life.

6. Group Term Insurance

Group term insurance is usually offered by employers to their employees or banks to their account holders. It provides life cover to a group of individuals under one umbrella plan. Although extremely affordable, the coverage is often limited and non-transferable if you leave the group. It is great as an add-on but not recommended as your sole life cover as the employer/organization is the master policyholder.

Drawbacks:

• Coverage is limited and often inadequate.
• Policy lapses if you leave the organization.

7. Joint Term Insurance

This plan covers two lives — usually spouses — under a single policy. In case either partner passes away, the surviving partner receives the sum assured. It is convenient and often cheaper than buying two separate plans. It can be decent for married couples or parents with shared responsibilities. However, if both spouses are working independently and their finances and responsibilities are planned separately, opting for separate plans is better from the point of view of cost, tax benefits, and nomination.

Drawbacks:

• A larger payout usually happens on the primary spouse’s death only.
• The surviving spouse's cover will be lower, and if the order of death is changed, the payout will be much less than the spouse’s sum assured.
• Riders are available for the primary spouse only.

8. No-Cost/Zero-Cost Term Insurance

No-cost term insurance is a newer option that’s gaining popularity. It comes as an inbuilt feature, and you get a refund if you exit the policy early, usually within the specified tenure.However, the “no-cost” part kicks in only if specific conditions are met — like exiting at a predefined age. It is suitable for those who want flexibility without feeling like they’re losing money.

Drawbacks:

• Exit refund conditions can be restrictive.
• Need to choose term plans for specific tenures, generally 40 years and above, which can indirectly lead to higher upfront premiums.

9. Term Insurance for Housewives

While traditional term insurance is usually income-linked, some insurers now offer term plans specifically designed for homemakers, the sum assured of which is linked to the income of the working spouse. These plans acknowledge the financial value of unpaid labor — caregiving, household management, and child-rearing — and provide a life cover that supports the family financially in the absence of the homemaker. Eligibility criteria typically include the working spouse having adequate coverage already, and the sum assured for the homemaker is usually limited.

Drawbacks:

• Limited coverage amount compared to working individuals.
• Requires the spouse to have an existing life insurance policy (in most cases).
• Not widely offered by all insurers, so options are fewer.

These varied term insurance types ensure that there's a suitable plan for every life stage and goal. Whether you're protecting a home loan, planning for inflation, or securing your family's future — there's a term life insurance plan made for you.

Comparison Table: Types of Term Insurance Plans

Type	Coverage	Ideal For	Premium	Flexibility
Level Term	Fixed	All individuals	Low	Low
Increasing Term	Growing cover	Inflation-conscious	Moderate	Medium
Decreasing Term	Reducing cover	Loan protection	Low	Low
TROP	Fixed death or Survival benefit	Conservative investors	High	Low
Whole Life	Up to 99/100 yrs	Legacy planners	Very High	Medium
Group Term	Group policies	Employees	Very low	Low
Joint Term	2 lives covered	Couples	Medium	Low
No-cost Term	Refund of premiums	People who seek flexibility of getting their premiums back	Low	High

Factors to Consider While Choosing the Right Term Insurance Type

Choosing the right type of term insurance isn’t just about ticking boxes — it’s about aligning your policy with your real-life goals, lifestyle, and responsibilities. Here’s what you need to keep in mind before you lock in a plan:

• Life Stage & Financial Goals

Your age and current life stage play a huge role in deciding the best fit. Young professionals with few liabilities might prefer a Level Term Plan for its simplicity and affordability. Newly married couples might find a Joint Term Plan more efficient and cost-effective. Parents or those nearing retirement might lean towards Whole Life plans for legacy planning. Ask yourself: What are you trying to protect — your income, your family’s future, or both?

• Current Income and Expenses

Be realistic about what you can afford today without compromising your living standards.If your budget is tight, Group Term Plans or Decreasing Term Plans can be cost-effective.If you have a bit more room, Level cover or Increasing Term Plans might give you added peace of mind. Your term insurance should protect your family, not burden your monthly budget.

Dependents and Future Liabilities

Your family’s needs are at the heart of your decision. Have kids who’ll need financial support for the next 15-20 years? Have a home loan, education loan, or aging parents who depend on you? 

If your liabilities reduce over time, a Decreasing Term Plan could make sense. But if you're building a family and planning long-term, a Level or Increasing Plan offers better stability.

Premium Affordability

Your premium should fit comfortably into your current and projected income. Always compare the premium-to-benefit ratio across different term life insurance plans. A costlier plan with unnecessary add-ons might look attractive — but will it really serve your goals?

Flexibility and Rider Options

Life isn’t static. Neither should your insurance be. You should try to add riders like critical illness, accidental death, or waiver of premium. Choose a plan that evolves with you — not one that restricts you.

Pro Tip: It’s always wise to review your term insurance needs every few years, especially after major life events like marriage, childbirth, or buying a house.

Riders That Enhance Term Insurance Policies

Term insurance does a great job of covering life’s biggest “what if,” but with the right riders, you can make your policy smarter, stronger, and far more personal.

Waiver of Premium Rider

With this rider, future premiums are waived if the policyholder becomes critically ill or disabled and is unable to earn. The best part? The policy remains active and continues to provide coverage despite no further payments. It's a great safeguard that ensures temporary income disruptions don’t impact your long-term financial planning.

Critical Illness Rider

A critical illness rider provides a lump sum payout upon diagnosis of specified life-threatening illnesses such as cancer, heart attack, stroke, or organ failure. This payout can be used for medical treatment, covering household expenses, or compensating for income loss during recovery. It’s a crucial add-on in today’s age of rising healthcare costs and lifestyle-related diseases.

Accidental Total and Permanent Disability (ATPD) Rider

This is an add-on to term insurance that provides financial support if the policyholder suffers a life-altering disability due to an accident. If the insured becomes permanently unable to work, the rider offers a lump sum payout or monthly income, helping manage medical expenses, daily living costs, and income loss. It's a smart way to enhance your base cover and ensure long-term financial stability for your family during tough times.

Accidental Death Benefit Rider

This rider offers an extra payout if the policyholder dies due to an accident. It’s often recommended for those in high-risk jobs or who travel frequently. For instance, if someone working in construction passes away in an accident, their family would receive an additional sum on top of the base cover. However, keep in mind that term insurance already covers accidental deaths. So, instead of adding this rider, it might be more practical to increase your base cover—ensuring your family is protected against all types of death, not just accidents.

Terminal Illness Rider

Usually offered as an inbuilt feature, this rider allows the insured to receive the sum assured in advance if they are diagnosed with a terminal illness — typically defined as a condition with a limited life expectancy (usually less than 6 months). It gives the policyholder and their family some financial breathing room to manage treatment expenses or make important end-of-life decisions without added stress.

Adding riders to your term insurance policy is like customizing a safety net to fit your life perfectly. While they come at an extra cost, they significantly increase the policy's usefulness. The key is to choose riders that align with your lifestyle, income, and health risks — turning your basic policy into a well-rounded financial shield for you and your family.

Increasing/Decreasing Cover

Some term insurance plans offer riders that let you either increase or decrease your cover over time. An increasing cover rider automatically boosts your sum insured by a fixed percentage (say 5–10%) each year to help you beat inflation. It’s a convenient way to ensure your cover keeps pace with rising costs—without manually recalculating your needs. But this convenience comes at a cost: premiums can be 50–60% higher than level cover plans. On the flip side, a decreasing cover rider reduces your sum insured as you grow older—when your liabilities drop and your dependents become financially independent—resulting in lower premiums over time.

Return of Premium Rider

The Return of Premium (ROP) rider in term insurance does exactly what it sounds like—it refunds the premiums you've paid if you outlive the policy term. But there are two key things to remember: First, the refund is only given if you survive the entire policy duration. Second, the amount returned includes only the base premiums—you won’t get back the GST or any extra amounts paid for riders like ROP or others added to the plan.

Benefits of Buying Term Insurance

Term insurance isn’t just another financial product — it’s a powerful shield that protects your loved ones from life’s uncertainties. Here’s why it’s one of the most essential components of a sound financial plan:

High Coverage at Affordable Premiums

Term plans offer a large sum assured for a relatively low premium, making it a cost-effective way to secure your family’s financial future.

Tax Benefits

You can claim deductions up to ₹1.5 lakh under Section 80C on the premiums paid, and the death benefit is completely tax-free under Section 10(10D).

Financial Security for DependentsThe payout from a term policy can help your family cover daily expenses, repay loans, and achieve future financial goals — even in your absence.

Peace of Mind

With term insurance in place, you can live your life confidently, knowing your loved ones will be financially protected no matter what happens.

Whether you’re just starting your financial journey or planning for the long haul, term insurance brings clarity, stability, and comfort — all with a simple policy that truly puts your family first.

Best Term Insurance Plans in India 2025

1. HDFC LIFE Click 2 Protect Super: HDFC Life Click2Protect Super is a comprehensive term insurance plan that stands out for its high customizability and strong claim settlement track record, though it tends to be relatively expensive for many profiles. The plan boasts a Claim Settlement Ratio of 99.2% and an exceptionally low complaints ratio of just 2 per 10,000 claims, indicating reliable service. It offers useful add-ons like accidental death benefits, waiver of premium on disability or critical illness, total permanent disability cover, and even the option to increase cover in line with inflation. A notable in-built feature is the zero-cost option, which allows you to exit the policy during a specified window and get your premiums refunded. While the critical illness benefit covers 60 illnesses and includes a shorter-than-average waiting period of 90 days, it comes with a 15-day survival clause and only pays on top of the base cover—not as an accelerated payout. The terminal illness benefit offers partial payouts, and while the plan includes the return of premium and top-up options, these are either costly or limited to life events like marriage or childbirth. Overall, it's a solid plan from a reputed insurer but not the most budget-friendly choice out there.
2. ICICI Prudential iProtect Smart: ICICI Prudential iProtect Smart is a well-rounded term insurance plan that balances affordability and features well, especially for salaried individuals and smokers. It offers competitive premiums, a decent claim settlement ratio of 97.52%, and a solid amount settlement ratio of 92.1%, with fewer complaints than the industry average—making it a fairly reliable option. One of its standout features is the Life Stage Benefit, which lets you increase your coverage after major milestones like marriage or childbirth. It also includes useful in-built features like a Zero Cost Option, allowing you to exit the policy during a specific window and get your premiums back, and a terminal illness benefit that pays out the full cover upon diagnosis. The plan allows for an accidental death benefit add-on and offers critical illness coverage for 34 illnesses, with immediate payouts upon diagnosis—though the benefit is paid from the base cover (accelerated payout) and has a longer-than-average 180-day waiting period. The waiver of premium is only triggered upon permanent disability due to an accident, and while there's no inflation-linked top-up or payout for total permanent disability, the plan still holds strong for those looking for decent coverage at a fair price. It’s especially appealing if you want basic protection with a few thoughtful add-ons without breaking the bank.
3. Axis Max Life Insurance Smart Term Plan Plus: The Axis Max Life Smart Term Plan Plus is a flexible term insurance plan that offers seven different coverage options, but the "Regular (Level Cover)" and "Smart Cover" variants are the real standouts. The Regular option is a simple, no-frills plan, while the Smart Cover gives you 1.5X coverage for the first 15 years—ideal if you want extra protection during your high-responsibility years. The plan comes packed with essential add-ons like accidental death benefit, critical illness cover (covering 64 illnesses), waiver of premium on disability or critical illness, and even a zero-cost exit option that refunds your premiums if you exit during a specified period. Women also get access to thoughtful perks like Lifeline Plus and Maternity Cover. That said, the plan doesn’t allow you to top-up your coverage later or link your coverage to inflation, which can be a drawback if you’re looking for long-term adaptability. Still, for most people, it’s a well-rounded and customizable option that ticks a lot of boxes.
4. Bajaj Allianz Life eTouch II: Bajaj Allianz Life eTouch II is a well-rounded term insurance plan that offers affordability, strong claims performance, and solid rider benefits. It includes a Zero Cost Option, so you can walk away with your premiums refunded if you exit at a certain point. There’s also a waiver of premium for permanent disability due to accidents and a life-stage benefit that lets you increase coverage after major milestones like marriage or childbirth. Its critical illness rider covers up to 60 conditions, pays out on top of the base sum insured, and comes with a relatively short 90-day waiting period and a 14-day survival clause—quicker than many in the market. Women and non-smokers also enjoy highly competitive pricing. Bajaj Allianz’s claim settlement (99.11%), low complaint ratio (4.4 per 10,000 claims), and amount settlement ratio (93%) are all impressive, especially when compared to industry averages. That said, there are a few misses—you don’t get the option to link your cover to inflation, and there’s no lump sum payout for total permanent disability. But overall, if you’re looking for a plan that balances price, features, and reliability, eTouch II is a pretty compelling pick.
5. TATA AIA Sampoora Raksha Promise: The TATA AIA Sampoorna Raksha Promise is a solid pick if you're looking for a highly customizable and reasonably priced term plan. It’s especially great for people with lower annual incomes who still want substantial coverage. The plan comes with strong claim metrics—boasting a 98.9% claim settlement ratio, a low complaints ratio of just 3 per 10,000 claims, and an impressive 92.7% amount settlement ratio. It also offers useful add-ons like critical illness cover, which pays out a lump sum on top of your term cover if you’re diagnosed with any of the 40 listed illnesses. The accidental death and total permanent disability benefits add an extra layer of protection, and you also get a waiver of premium if you're ever critically ill or permanently disabled. There are a few nice built-in features, too, like the life stage benefit, which lets you increase your coverage after big life events and a partial terminal illness payout. That said, it does fall short on a couple of fronts. There's no zero-cost option, which some other plans offer, and you can’t increase your coverage automatically with inflation. But these aren’t major deal-breakers for most people. Overall, if you're after a dependable term plan with solid features and strong claim performance, this one is definitely worth considering.

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Conclusion

To quickly recap — there are several types of term insurance: Level Term Plans (the most popular), Increasing/Decreasing Term, Whole Life Term, and TROP (Return of Premium). Each serves a different purpose, whether it's maximizing pure protection or getting your premiums back at the end.

When choosing a plan, consider your age, income, liabilities, dependents, and how long you need coverage. A young salaried professional might opt for a level-term plan with a long tenure, while someone with a non-working spouse (homemaker) may prefer a housewife term plan for them.

And finally — while term insurance is straightforward, it's still a big financial decision. Always consult a licensed financial advisor before locking in a policy. The right plan today can offer your family the peace of mind they need tomorrow.

Frequently Asked Questions (FAQs)