| Why is Term Insurance Important? Term insurance is important because it gives high life cover at low premiums. It also secures your family’s financial future in your absence. However, it’s not an investment plan. It’s pure protection against unfortunate life events, offering absolute peace of mind. |
Home loan EMIs, school fees, medical expenses, retirement savings — life moves fast. But have you ever thought what would happen if you’re not around anymore? Will your family be able to manage on their own?
This is precisely the reason why term insurance is important.
At Ditto, our motto is to help customers make smarter insurance decisions. And when it comes to buying term insurance, we see there’s a lot of misinformation around. So, we thought of breaking it down for you.
By the end of this article, you will have understood the significance of investing in a term insurance plan for a better tomorrow.
What Is Term Insurance?
A term insurance is pure life cover for a fixed period (or term). In simple words, if the insured dies during the period, the nominee gets the sum assured. But if the insured outlives the term, there’s no pay out.
That’s where most people take a step back, thinking, “If I won’t get any money back at the end of everything, why pay?”
The purpose of term insurance is to acquire peace of mind as one doesn't have to bear the expense arising from unforeseen crises.
Similar to other types of insurance, a term plan also has different variants, like:
- Level term: Your cover amount stays the same throughout the policy period. For example, if you buy a ₹1 crore cover, it will remain ₹1 crore until the end of the term. This is the most common and straightforward option.
- Increasing term: The cover increases by a fixed percentage every year, usually 5% or 10%, up to a certain limit. This works well if you expect your financial responsibilities such as children’s education or rising household costs to grow over time.
- Decreasing term: The cover gradually reduces during the policy period (percentage decrease varies across insurers). There are also plans that let you control the percentage of decreasing cover. However, it's a cost-effective choice when your main concern is protecting your family until large debts are fully repaid..
For first time insurance buyers, we recommend checking out our term insurance 101 guide.
Book a free 30-minute call with Ditto. Get IRDAI-certified advice, no pushy sales, and clarity on the best term insurance plan for you.
Key Benefits of Buying a Term Insurance
Term insurance is more than life protection; even though it offers no returns, it is still worth paying for. Here are a few reasons why:
1) You Get High Cover At Low Cost
Term insurance offers significant financial protection for a fraction of the cost. For example, a healthy 30-year-old can get a ₹1 crore cover by spending as little as ₹900–₹1000 per month. That means for every ₹1 you spend on the premium, you’re getting nearly ₹2,000 worth of life cover.
Plus, once you buy the policy, your premium will stay the same throughout the entire term. And this is great because locking in your premium early means you avoid any high costs that come with age or health issues down the line.
2) You Are Guaranteed Financial Peace
Term insurance policies are exclusively designed to replace income, clear debts, pay for your child’s education, and even take care of household expenses when you won’t be around.
3) It’s Simple & Transparent
Term plans are straightforward; no hidden bonuses, no market-linked surprises. What you see is what you get, making it one of the simplest forms of financial protection.
4) Tax Benefits Are A Plus
Term insurance premiums qualify for tax exemption under Section 80C (under the old tax regime). In addition, Section 10 (10D) offers tax exemption for death benefit payout amount. Beyond the core protection, these are little perks of buying term insurance.
5) Flexibility to Add Multiple Riders
Term insurance gives you the option to add more than one rider to boost your protection. Here’s a quick look at some of the best rider options.
- Critical Illness Rider: Pays a lump sum when one’s diagnosed with a major illness (like cancer or heart attack) to cover treatment and income loss.
- Accidental Disability Rider: Provides financial support (makes up for loss of income) if an accident leaves one partially or permanently disabled.
- Waiver of Premium Rider: Waives off future premiums if you’re unable to work due to illness or disability, while still keeping your policy active.
Know more about term insurance riders work and how to choose the best riders in 2025.
Quick Comparison: Term Insurance vs Other Life Insurance Products
The table below offers a quick comparison between Term Insurance and other life insurance products.
| Term Insurance | Endowment/ Money Back | ULIP | |
|---|---|---|---|
| Purpose | Pure protection | Protection + Savings | Insurance + market investment |
| Cover to Premium Ratio | High | 3–10 times of annual premium |
5–10 times of your annual premium (for common ULIPs) 15–40 times of annual premium (for comprehensive ones) |
| Returns | None (unless you opt for Return of Premium) | Declared bonuses are available, insurer manages money | Always market-linked, managed by fund manager |
| Complexity | Low | Medium | High |
| Best For | Maximum coverage at low cost | Cover and forced savings | Long-term investing with insurance |
| Drawbacks | Strict income, education and age restrictions | Low cover for cost | Higher charges and market risk |
So, if your primary goal is protection, term insurance easily beats other options.
Why Term Insurance is A Great Option For Life's Milestones?
You pay for Netflix, Prime, Disney+ and other OTT subscriptions, right ?
Well, term insurance is the ultimate “subscription” for peace of mind because it pays back when it matters most. Here’s a quick look at the payout options to help you decide which one is right for your family, the pros and cons.
| Payout Mode | Pros | Cons |
|---|---|---|
| Lump sum (Ditto’s recommendation) | Promises high flexibility when you have existing loans and face emergencies | Demands financial discipline, proper allocation |
| Monthly income | Promises cash-flow stability and reduces overspending |
Might not work for big, one-time needs Dependence on the insurer for payout for a long time |
| Lump sum + monthly income | Great for covering near-term debts and all ongoing expenses | One needs to be careful about deciding the split |
Pro Tip: Most modern term insurance offers a mix payout mode for customers. So, pick one that you think your family can handle well.
How Much Cover Do You Need?
There’s no fixed formula to decide on the right term cover. Generally, you should opt for a cover that can balance your income, keep your debts in check, and meet your family’s future needs.
As a guideline, if you’re the only earning member or have multiple EMIs to pay, go for a higher cover. On the other hand, if you’ve more than one source of income and lesser EMIs, go with a mid-range cover.
It's always a wise call to factor in some buffer for elderly care, children education, and other special needs. Although, in real life, your actual eligibility for a desired cover will be decided by affordability and underwriting.
Pro Tip: Choose a term plan that lasts until your family no longer depends on your income. For most people, that’s the retirement age plus a few buffer years. Beyond that point, you’re financially independent, so paying extra for cover doesn’t really add value when you calculate the ideal term insurance coverage.
Here’s a smart checklist to keep handy before you buy a term insurance plan.
- Check insurer reputation and key performance metrics like claim settlement ratio, business volume, complaints, and solvency
- Ensure underwriting clarity (especially for things like smoker definitions, medicals, and income proofs)
- Know riders and payout flexibility for real-time scenarios
- Check post sales support and claims experience
- Get clarity on total cost of your profile
- Choose reliable advisors well versed in insurers and processes
Term Insurance : Myths Vs Fact
At Ditto, we’ve seen customers backing out from buying a term insurance plan at the last moment. That’s why it's necessary to bust some common myths and let you know the facts for sure.
Myth: “If I outlive the term, I lose everything.” Fact: Term plans are meant purely for life protection, not investment. So, if you want maturity benefits, opt for a Return of Premium (ROP) plan, but it comes at a cost where premiums are 60–100% higher, and you only get back your own money (minus GST) without any profit or interest.
On top of that, the amount you receive decades later will have far less purchasing power because of inflation. In short, what feels like a big sum today may not even cover basic expenses in the future.
Myth: “Term insurance is only for young people.”
Fact: Term plans are open to all (generally available to individuals aged 18–60). Those above 60 can also apply, but with stricter medical checks and underwriting.
Myth: “Life insurers don’t pay out term insurance claims.” Fact: As per IRDAI Annual report (2023-24), that’s not true at all. In fact, for individual life insurance, insurers paid 95.51% of the total death claim amounts (₹28,868 Cr). Out of 10,00,045 claims filed, 9,82,615 were settled, reflecting a strong claim settlement ratio of 98.26%.
| Key Takeaways: 1) Term insurance plans are designed for pure life protection, not investment returns. 2) Term insurance gives you high coverage at low premiums, especially when bought early in life. 3) A term plan can also secure key life milestones like paying loans, funding kids’ education, and protecting retirement savings. 4) Term plans come with flexible payout modes, riders, and tax perks. |
Term Insurance Plans That Make Ditto's Cut
| Before we jump into the list, here’s how we decide what “best” means. At Ditto, every plan goes through our six-point evaluation framework. This framework is why we’re comfortable using the word “best.” It doesn’t mean these are the only good plans, but that they stand out after being scored across all six pillars. You can learn more about how we evaluate the plans here. |
Here’s how we evaluate term insurance plans.
| Plan | Key Features | Drawbacks (Optional) |
|---|---|---|
| HDFC LIFE Click2Protect Supreme |
|
Premiums are on the higher side |
| ICICI Prudential IProtect Smart Plus |
|
Waiver of premium rider not launched yet |
| AMLI Smart Term Plan Plus |
|
No life stage cover increase or inflation-like top-up |
Why Choose Ditto For Your Term Insurance?
Sales pitches and hidden costs won’t get you the best term insurance plans in the market. What you need is solid, fact-backed guidance from an industry expert to secure your family’s future.
We’re called "Ditto" for a reason. We only recommend insurance plans that we’d buy ourselves. That’s why we stick to recommending pure term insurance; no investment-linked or savings plans.
✅No-Spam & No Salesmen
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✅Backed by Zerodha
✅100% Free Consultation
✅Personalized recommendations
✅Real-time claim support
Conclusion
Not many people realize that term insurance is the ultimate financial plan for grown ups. While you’re busy building a life, term insurance protects everything that you’re building. From your family’s lifestyle to your kid’s future, this is your ticket to keep it secured forever. So, buy a term insurance early in life, review your cover every five years, and relax!
Need help in choosing the best term insurance plan? Ditto’s IRDAI-certified insurance advisors can help you shortlist top plans, explain the benefits and trade-offs to make a smart purchase.
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