What are the Benefits of Life Insurance for Inheritance Tax Planning?

Even though India currently does not levy inheritance tax or estate tax, many High Net-Worth Individuals (HNIs) and Non-Resident Indians (NRIs) use life insurance, especially term insurance as a smart tool for legacy planning. If you often hear terms like “inheritance tax in India”, “estate tax in India”, or “tax on inheritance in India”, here’s how life cover neatly fits into the picture.

51 Partners Insurance Partners

12.02 Crore Registered Consumer

5.9 Crore Policies Sold

We are rated ++ rating

₹1 Crore Life cover starting from ⁺

Lowest Price Guarantee ^˜

Male

Female

Name

Date of Birth

Mobile Number

Check Your Premium Now

Get Updates on WhatsApp

Here is a list of benefits of life insurance for Inheritance tax:

Provides Immediate Liquidity for Your Heirs

Imagine you have large real estate, business stakes or foreign-assets. If a tax on inheritance or estate tax is introduced or if heirs face tax in another country—the sudden liability can force the sale of your assets at the worst time. A high-value term insurance plan gives your family a tax-free lump sum at the time of your death, ensuring there is enough cash to meet tax bills, debts or transfer costs without distress.

Safeguards Family-Business and International Assets

Many Indian HNIs own family businesses, farmland, or foreign properties. If rich-country laws impose estate duties on those assets held abroad, your heirs could face a tax burden. A well-structured term cover can support cross-border estate planning, preventing forced liquidation of business interests or foreign holdings.

Helps Equalise Inheritance Among Beneficiaries

In families where one heir gets physical assets (say a house) and others get financial assets, there’s often a mismatch in value or liquidity. With life insurance, you can ensure that each heir receives a suitable amount even if one gets property—so the estate remains balanced and fair. This becomes more important when you hear about “tax on inheritance in India” and want to ensure your legacy isn’t eroded.

Future-Proofing for Potential Estate Duties

While there is no inheritance tax in India today, policy discussions and global tax trends mean it is wise to plan for the possibility of future estate duties. In such a scenario, your term insurance acts as a financial buffer, giving you peace of mind that your heirs are covered for any “estate tax in India” if it ever comes.

Ideal for NRIs and Global Wealth Holders

NRIs often hold assets in multiple countries, making them vulnerable to foreign estate taxes even if India doesn’t have its own inheritance tax. A globally valid term insurance policy can be an essential component of their wealth-and-estate plan, ensuring that their global legacy isn’t disrupted by overseas tax rules.

Term Plans

₹1
Crore

Life Cover

@ Starting from ₹ 13/day⁺

₹50
LAKH

Life Cover

@ Starting from ₹ 8/day⁺

₹75
LAKH

Life Cover

@ Starting from ₹ 12/day⁺

The Benefits: How Term Insurance Preserves Your Estate

Life insurance, particularly a term insurance policy, is the most efficient and cost-effective tool for Inheritance Tax or legacy planning.

Estate Liquidity: Term insurance provides an immediate, tax-free lump sum payout, which can be used to settle legal costs, potential estate taxes (in applicable jurisdictions), or other financial obligations that may arise upon the policyholder's death.
Asset Protection: Without ready cash, heirs may be forced to sell property, shares, or other assets, sometimes at undervalued prices. Term insurance ensures they have access to funds without prematurely liquidating valuable assets.
Loan Clearance: If the estate includes properties or assets tied to loans, the term insurance payout can help settle these debts, thus protecting the collateralised assets from being claimed by lenders.
Family Business Continuity: In the event of the policyholder's demise, the insurance payout can support the ongoing operations of a family-run business, preventing disruption and allowing a smoother leadership transition.
Wealth Preservation: Term insurance helps preserve the integrity of the estate, ensuring that wealth is passed down to the next generation as intended, without being eroded by financial liabilities or forced asset sales.

Secure Your Family Future Today

₹1 CRORE

Term Plan Starting @

Get an online discount of upto 15%^#

Compare 40+ plans from 15 Insurers

⁺Standard T&C Applied

The Core Problem Life Insurance Solves: Lack of Liquidity

When a wealthy individual passes away, their assets (property, art, businesses) are often illiquid, meaning they cannot be quickly turned into cash. The problem is, estate tax or immediate expenses require liquid cash.

This is where life insurance steps in.

An HNI might leave behind a ₹50 Crore business and a ₹20 Crore home, but their heirs have no immediate cash to pay the potential ₹5 Crore tax bill, legal fees, or the deceased's outstanding business loans. Term insurance guarantees a solution to this cash crunch.

Wrapping Up!

When you see terms like “inheritance tax in India”, “estate tax in India” or “tax on inheritance in India”, remember: while India currently exempts direct inheritance tax, the risks of future tax changes, cross-border liabilities and legacy shocks remain real. That’s where a well-chosen term insurance policy becomes more than protection. It becomes a smart legacy tool that ensures your assets pass on smoothly, your debts are covered, and your family isn’t forced into sudden asset sales.

People also search for

What is Term Life Insurance

Different types of Plans

Term Insurance

View Plans

Life Insurance

View Plans

List of Term Insurance Companies

View Plans

TROP

View Plans

Term Insurance For Senior Citizen

View Plans

Term Insurance For Spouse

View Plans

Term Insurance For Family

View Plans

Term Insurance For NRI

View Plans

List of Term Insurance Plan

View Plans

Life Insurance Corporation of India

View Plans

What is Term Insurance?

View Plans

Term Insurance Calculator

View Plans

1 Crore Term Insurance

View Plans

2 Crore Term Insurance

View Plans

Explore the popular searches and stay informed

˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. For complete list of insurers in India refer to the IRDAI website www.irdai.gov.in

Rs. 400/month is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 400/month (Rs.13/day) is starting price for a 1 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 230 is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 8/day is starting price for a 50 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 12/day is starting price for a 75 lakhs term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

+Rs. 497/month is starting price for a 1.5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 487/month is starting price for a 2 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 626/month is starting price for a 3 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 905/month is starting price for a 5 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,267/month is starting price for a 7 crore term life insurance for an 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

*The full refund of premium is available on availing the one-time option of refund of premium. Total premium paid for policy (paid for add-ons) will be the special exit value, payable on availing the one-time option of refund of premium if you wish to completely exit the policy.

+Rs. 447/month is starting price for a 1 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs.679/month is starting price for a 2 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 910/month is starting price for a 3 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,374/month is starting price for a 5 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

+Rs. 1,924month is starting price for a 7 crore term life insurance for an (NRI) 18 year-old male, non-smoker, with no pre-existing diseases, cover upto 30 years of age.

Women

+Rs. 400/month is Starting price for a 1 crore term life insurance for an 18 year-old Female, non-smoker, with no pre-existing diseases, cover upto 30 years of age, rounded off to nearest 10.

Rs. 461/month is the starting price for a 1 crore term life insurance for an 24 year-old female, non-smoker, with no pre-existing diseases, cover upto 54 years of age.

1,642/month is the starting price for a 1 crore term life insurance for an 44 year-old female, non-smoker, with no pre-existing diseases, cover upto 74 years of age.

Prices offered by the insurer are as per the approved insurance plans | #All savings and online discounts are provided by insurers as per IRDAI approved insurance plans | Standard Terms and Conditions Apply | **Tax Benefits are subject to changes in tax laws.| Policybazaar Insurance Brokers Private Limited

We will respond in the first instance within 30 minutes of the customers contacting us. 30-minute claim support service is for the purpose of giving reasonable assistance to the policyholder in pursuance of the claim. Settlement of claim (including cashless claim) is the responsibility of the insurer as per policy terms and conditions. The 30-minute claim support is subject to our operations not being impacted by a system failure or force majeure event or for reasons beyond our control. For further details, 24x7 Claims Support Helpline can be reached out at 1800-258-5881

For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale

Policybazaar Insurance Brokers Private Limited | CIN: U74999HR2014PTC053454 | Registered Office - Plot No.119, Sector - 44, Gurgaon, Haryana – 122001 | Registration No. 742, Valid till 09/06/2027, License category- Composite Broker Visitors are hereby informed that their information submitted on the website may be shared with insurers. Product information is authentic and solely based on the information received from the insurers.

˜ Policybazaar Promise reflects the guarantee offered by insurers. Price assurance is based on certifications shared by insurers with us.