What is Term Insurance?

In this article we are going to understand, what is term insurance, meaning of term insurance, how does term life insurance works and why term plans are significant when it comes to long-term financial planning.

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What is Term Insurance?

Term insurance or term life insurance offers financial protection to your family against unfortunate events. When understanding, what is term insurance, it is also important to know - the term insurance premium rate can differ depending upon your age, gender, lifestyle habits, coverage tenure, etc. So one should thoroughly know the term plan meaning for choosing the right term policy. Let’s look at what is term insurance and how it works in detail :

Definition of Term Insurance : The term insurance meaning can be regarded as the agreement between the insurance company and the policyholder (life assured), where a specific amount is paid to the policyholder’s family by the insurer in case of an unfortunate demise of the life assured. 

Many insurance companies in the market offer an array of term insurance plans and choosing one is a quite tiresome task. Most buyers are often confused about the meaning of term insurance and what is the right plan to go for. To make your selection easy, it is important to be aware of the term plan features, benefits, and terms and conditions.

Term life insurance states that it is a type of pure life insurance policy, which provides comprehensive financial protection and security to your loved ones against any uncertainty of life.  In case, the insured passes away during the term insurance policy term, the lump sum amount is paid to the nominee as a death benefit. A term insurance plan is easily available at pocket-friendly premiums when compared to any other type of life insurance policy. 

Let us quickly define term insurance meaning and what does it imply with the term insurance definition.

Types of Term Insurance Plans

Nowadays, number of plans are designed to cater the needs of individuals from every walk of life. On the basis of the suitability and preferences, an individual can compare the term insurance plans online and narrow down the search accordingly.

Now that we understand what is term plan meaning, moving ahead let us take an insight into the different types of term insurance plans available in the market.

  1. Standard Term Insurance Plans

    The standard term insurance plans are one of the most common and simplest forms of term plan, which offers life protection to the policyholder’s family in the form of the death benefit in the event of the untimely death of the insured holder during the policy term.

  2. Group Term Insurance Plans

    Group term insurance plan is specifically designed for businesses, companies, societies, and associations. It provides life coverage to all the members of a specific group or company. The benefits offered by group life insurance policies are the same as the individual term insurance plan. However, group term insurance plans provide high coverage when compared to an individual term plan.

  3. Term Return of Premium (TROP)

    Term Return of Premium (TROP) is a type of term insurance plan, which offers survival benefits as the return of premium. In case, the policyholder lives the entire term of the policy then the whole premium amount paid by the policyholder excluding tax is paid back to the policyholder. This plan is a great investment option for individuals who want to create a corpus for the long run along with the benefit of life protection.

    Best term Insurance Plans in India
  4. Increasing and Decreasing Term Plans

    With the increasing term insurance plan, the coverage provided gets increased at a particular duration during the tenure of the plan. The policy calculates the risk according to the rising cost during the term of the policy and compensates. The policy coverage keeps on increasing until the time the policy acquires a value, which is 1.5 times higher than the actual policy coverage.

    Under the decreasing term insurance plan, the rate of premium payment, as well as life coverage offered by the policy, keeps on decreasing at a specific rate during the entire policy tenure. Decreasing term insurance plans are generally used by financial institutions and banks that cover the risks of the home loan or mortgage provided to their customers.

  5. Convertible Term Plan

    Convertible term insurance plans are traditional insurance policies, which has a limited policy term and can be converted into whole life insurance permanent life insurance policy. The major benefit of a convertible term insurance policy is that while converting the term plan into whole life insurance, the policyholder does not require submitting any medical proof.

What are the Key Features of Term Insurance Plan? 

Wondering what is term insurance's major role. Well, the major objective of a term insurance policy is to offer financial stability to the policyholder’s family in case of an unfortunate event or decease of the policyholder. The insurer needs to define term insurance plan features to their customers as easily and smoothly as possible so that they understand the meaning of term life insurance. 

Let’s take a look at some of the following features offered by the term insurance plan:

  • Entry Age: The term insurance plans offer minimum eligibility age of 18 years, whereas, the maximum age eligibility to purchase a term plan is 65 years. Along with the increase in the age of the policyholder the premium rate of the policy also increases. Therefore, it is recommended to buy a term insurance plan at a young age so that one can secure their family’s future at an affordable premium rate.

  • Maturity Age: The most advantageous term insurance plans are those, which offer coverage to the policyholder for a lifetime. Most of the term insurance plans offer a maturity age of 65-70 years. The plan that offers a higher maturity age also has a higher rate of premium as it provides insurance coverage for the long term. 

  • Enhanced Cover: Certain insurers offer the flexibility to enhance the coverage of the policy while achieving the major milestones of the insured’s life. For example, the policyholder may have the facility to enhance the coverage of the policy by 50% at the time of marriage and by 25% at the time of becoming parents. This makes it possible for an individual to start with a low cover and enhance the coverage along with the increase of responsibilities and also increase the premium rate of the policy.

  • Larger Life Cover: As the premium rates of a term insurance policy are more affordable, it is possible for insurance buyers to choose a policy with higher life coverage for the same premium as endowment plans.

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  • Policy Tenure: A term insurance plan offers a minimum tenure of 5 years whereas; the maximum term period of the policy can differ from 25 years to entire life. For a single premium payment policy, the tenure of the policy ranges from 5 years-15 years.

  • Death Benefit: In case the policyholder passes away during the tenure of the policy then the insurer pays a total sum assured amount to the nominee of the policy as a death benefit. According to the type of policy chosen by the policyholder the amount of sum assured remains the and the death benefit is paid as lump-sum or at particular intervals of time.

  • Maturity Benefit: A traditional term insurance policy doesn’t offer any maturity benefits. However, if one wants to avail of survival benefits then he/she can choose to invest in the term return of premium plan (TROP).

  • Survival Benefit: A traditional term insurance plan does not provide any maturity benefit. However, to provide a comprehensive policy to the insurance buyers, many insurance companies offer a Term return of Premium Plan (TROP). Under the TROP plan, the entire premium of the policy is returned to the policyholder as a maturity benefit in case of his/her survival at the end of the policy tenure. As compared to the pure term insurance plan, the premium rate of TROP is higher and is a remunerative option of investment for individuals who want to gain the combined benefit of insurance cum savings.

  • Additional Rider Benefit: An extra coverage is offered under a term insurance policy accompanied by basic policy coverage as an add-on rider benefit. To avail of the rider benefit, the policyholder will have to pay an extra premium along with the basic policy premium. Let us take a look at the rider benefits offered under the term insurance plans.

    • Critical Illness Rider

    • Accidental death benefits rider

    • Hospital cash rider

    • Premium waiver rider

    • Total and permanent disability benefit rider

  • Annual Renewable: As each year completes, the term insurance policy is renewed with a higher premium since the age of the policyholder also increases. The major advantage of annual renewable term insurance is that it offers guaranteed coverage. 

  • Tax Benefit: Term Insurance plan also offers the benefit of tax exemption. The policyholder can save on taxes within Section 80C and Section 10(10D). Additionally, the premium paid by the policyholder towards critical illness benefit is also qualified for tax benefit u Section 80D.

What are the Key Advantages of Buying Term Insurance Plan?

As we have already talked about what is term insurance plan, term plan meaning and what is meant by term insurance features, let us quickly take a look at the listed below advantages of term insurance plans that helps you in making understand the meaning of term insurance and easily define term insurance’s important points:

  • Offers death benefit as a lump sum amount to the nominee of the policy when the policyholder passes away.

  • The term plan also takes care of loans and liabilities.

  • Offers financial security to the family of the policyholder so that they can continue to maintain a good lifestyle and meet the everyday expenses.

  • The term insurance policy also offers a supplementary income to the policyholder in case he/she is suffering from income loss due to accidental disability or critical illness.

  • In case of accidental demise of the insured an extra sum assured amount is paid to the beneficiary of the policy if the policyholder has opted for accidental rider benefit.

  • It offers discounts to non-smokers and female policy buyers.

  • The premium rate of term plans is much economical as compared to other life insurance plans.

  • It offers a low premium rate to healthy and young individuals.

  • A healthy individual can purchase a term plan online without taking a medical test.

Why do you need Term Insurance?

Many people do not consider investing in term insurance plans as it only provides a death benefit in event of the demise of the insured and does not offer any add-on benefit or profitable returns. Moreover, people are mostly not completely aware regards to what is term insurance plan benefits and features. As of now, we understand the term policy meaning, features, and advantages of a term plan. Moving ahead, listed below are some of the key reasons for choosing the best term insurance plan:

  • Financial Protection: Term Insurance plans are the simplest and best way to create a financial protection net for the dependents of the life assured in case of his/her unfortunate demise.

  • Adequate Coverage: The insurance buyers can choose the coverage of term insurance plans by comparing a wide range of term insurance plans online.

  • Offers Affordability: Along with the death benefit, there are various other additional benefits offered by the term plan at an economical term insurance premium rate.

  • Competitive Pricing: Term insurance policies are easily comparable, mainly based on price. One of the simplest ways one can distinguish between a term plan and other life insurance policies is through competitive pricing. Due to the affordable cost of term plans, it is preferred by most individuals.

  • Easy Access to Quotes and Information: The quotes and information related to a term insurance plan can be easily checked online. Also, with more and more insurers entering the industry with affordable plans, the insurance buyers have the facility to compare the plans online and choose the most lucrative plan as per their requirements and suitability.

    *All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

  • Flexibility: As compared to policies that offer cash value as a maturity benefit, it is easier to choose a term insurance policy. The process of a term insurance plan is quite simple. If the insured stops paying the premium of the policy, then the coverage of the policy ceases and the policy is no longer applicable. Considering that term insurance does not provide any maturity benefit, the insured will not receive any maturity benefit. 

  • Low Claim Rejection: As the policy tenure of the term insurance plan is more than 10 years; the ratio of claim rejections is observed to be lower.  Therefore, purchasing a term insurance plan is ideal if the individual wants to make sure that their claim is honoured.

  • Riders: Along with the basic life coverage the term insurance plans provide add-on rider benefits to enhance the coverage of the policy. The insurance buyers can buy rider benefits by paying an extra premium along with the basic premium of the policy.  Some of the riders offered by term insurance plans are an accidental death benefit, critical illness, partial and permanent disability, and waiver of premium.

Why buy Term Insurance early?

Your premium is decided on age at which you buy the policy and remains same, throughout your life

Premiums can increase between 4-8% each year after your Birthday

Your policy application could be rejected or premiums increase by 50-100%, if you develop a lifestyle disease

See how age affects Term Insurance Premiums
See how age affects Term Insurance Premiums
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Can I Buy Term Insurance Plans Online?

For the convenience of insurance buyers, most insurance companies provide online term insurance plans. The policy buyers can purchase the term insurance plans online in a very easy and simple way. Along with an easy option of premium payment, the insurance buyers can also compare various term insurance plans online and zero in on the most beneficial plans according to their requirements and suitability. 

Moreover, online term insurance plans also offer reliability and transparency to customers. Before buying a term plan online, always ask yourself: What is term insurance features, benefits, buying, and claim process. 

How to Buy the Best Term Insurance Plan Online?

Now that we are well aware of the important details of what is term plan or term plan meaning, here are the important things that should be kept in mind while purchasing a term insurance plan.

  • Determine the amount of coverage.

  • Assess the budget and needs.

  • Choose the right insurer.

  • Determine the period of the policy.

  • Choose a suitable payout option.

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What are the Exclusions Under a Term Insurance Plan?

The term insurance provides death coverage to the family of the insured in case of natural death of the insured, accidental demise of the insured, or death caused due to a health issue. Besides this, there are certain cases, which are excluded under the term insurance plan.

  • Suicidal death is not covered under the policy.

  • The policy does not provide any death coverage in case of self-inflicted injuries.

  • Death due to HIV/AIDS is not covered under this plan.

  • Death due to overdoes of drugs or intoxication is also not covered under the plan.

cover against critical illness

Wrapping It Up! 

In the end, what is term insurance, and what is term policy meaning, if not one of the most pocket-friendly ways of protecting the future of your loved ones and living without any uncertainties? The unique term plan benefits make this a valuable financial planning tool. You must protect your family members with this term plan, against any monetary crisis in your absence.

Best term Insurance Plans in India

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply


  • What is Term Insurance and How it Works?

    Ans. A term insurance plan is a pure life insurance product that offers financial protection to the family of the policyholder at low premium rates for a fixed time period. It provides large cover for a specific period in exchange for a fixed premium amount. The death benefit or sum assured is paid to the nominee if an individual dies during the policy term.
  • What are the minimum and maximum age limits to buy a term insurance plan?

    Ans. Generally, term insurance eligibility can vary for each insurance company and plan. All insurers offer plans with unique T&Cs. However, as per the usual conditions, the minimum entry age to buy a term plan is 18 years and the maximum entry age is 65 years.
  • What are the factors that affect the term insurance premium rates?

    Ans. Anyone who knows what is term insurance, also knows that there are a number of factors that affect the term insurance premium rates. The premium of a term plan varies depending on several factors like age, yearly income, term and amount of insurance coverage, health conditions, and lifestyle habits (smoker/non-smoker).
  • What is Term Insurance Rider?

    Ans. Term riders are add-on benefits that are attached to your regular term plan. They can be purchased at low rates. They also allow the policyholder to personalize the plan according to their requirements. Different insurers offer these riders- Critical illness, waiver of premium, accidental death, and permanent or partial disability.
  • How much Term insurance do I need?

    Ans. As per the insurance experts, the life cover in term insurance should be at least 10X of your yearly income, while 15-20X is always a good option to go for. You should always calculate your term cover as per your requirement. A human life value calculator can also be used to make these difficult calculations easy.
  • What documents are needed to buy term insurance plans?

    Ans. To buy a term plan, you will require the below-listed documents:
    • Identification Proof: PAN Card, Voter ID, or Aadhar card
    • Address Proof: Driving License, Voter’s ID card, Aadhaar ID, passport, and other identification documents 
    • Income Proof: Income Tax Returns, Salary Slips, bank statements
    • Age Proof: Aadhaar card, passport voter ID card, driving license.
  • What are the Tax Benefits of Term Insurance?

    Ans. With a term plan, you can avail of exemptions on tax to reduce your tax liabilities. You can receive a tax deduction on your premium up to Rs. 1.5 Lakh u/s 80C of the ITA, 1961. Also, in case of critical illness benefits, you can get tax savings benefit up to Rs. 25,000 u/s 80D.
  • Can I buy a Term insurance plan for a spouse?

    Ans. Yes, you can purchase a term plan for your partner. Joint term insurance plans offer various benefits. All these plans cover you and your partner under a single plan. Purchasing a joint term insurance plan for yourself and your spouse can be hassle-free, simple, and effective to buy term insurance.
  • Is it good to have term insurance?

    Ans. Yes, it is good to have term insurance. A term plan will help your loved ones to meet their daily expenses and fulfill their long-term financial objectives also.
  • Is it possible to add a term rider to a current term plan?

    Ans. Yes, you are allowed to add a rider at the time of renewing your current term plan. Some insurers may have different T&Cs.

Types of Term Plans

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