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Term insurance is a type of life insurance plan that offers coverage for a fixed time period, i.e., called the policy term and pays a death benefit to your nominees/beneficiaries in case you die during the policy term. It is a best way to ensure that your family gets financial support in case of your absence. Let's discuss the term insurance definition and meaning in detail:
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What is term insurance?
Simply put, term insurance is a type of life insurance plan that provides financial protection to your family for a specific period. If you pass away during the policy term, your beneficiaries receive a death benefit, ensuring their financial security. This type of insurance is known for offering high life coverage at relatively low premium rates.
Term Insurance Meaning:
At its core, term insurance meaning revolves around providing a safety net. It's a contract that guarantees a payout to your designated nominee in the event of your untimely death during the policy's duration. This benefit can be crucial for settling outstanding debts and maintaining your family's financial stability.
Term Insurance Definition:
When exploring term insurance definition, it is important to note that term plans are among the most affordable life insurance options, offering substantial coverage at lower premiums. These plans are crucial in long-term financial planning, ensuring a family's financial well-being.
Term insurance provides peace of mind, knowing your loved ones will be financially protected, regardless of the future.
Following individuals should first understand what is term insurance and then buy, as it can help them understand how term insurance can help them and how it can benefit them:
Young People: Young individuals can secure their dependent parents and get a large life cover at affordable rates.
Parents with Kids: Parents with young children can buy term plan for parents to ensure that their kids are able to pursue higher education.
Newly Married: People who are newly married can protect their spouse with term insurance and ensure they are able to maintain their current lifestyle.
Housewives: Now, term insurance for housewife is also available to help housewives secure the financial future of their husband, kids, or families.
Self-employed: Self-employed individuals can also buy term insurance by presenting their surrogate income proof documents.
Non-resident Indians: Term insurance for NRI helps to secure their family living back in India at low premiums and get high life cover.
Taxpayers: Taxpayers can save on their yearly taxes on term insurance as per the prevailing tax laws.
Term insurance locks your premium rate at the time of purchase, ensuring it remains unchanged throughout the policy term.
You can easily increase your sum assured with the life stage benefit in term insurance.
Term Insurance premiums are much more affordable for non-smokers than for smokers.
You can enhance the base cover of your policy using the available term insurance riders.
To understand what is term insurance, you need to take a look at the term insurance meaning.
Term insurance offers tax benefits under sections 80C, 80D, and 10(10D) of the IT Act, 1961.
Now that we have understood what is term insurance, let us take a look at the benefits of term insurance plans in India.
Family’s financial security: If you are the sole breadwinner of your family, buying a term plan would take care of your family's financial needs in case of your absence. The insurer will pay out the life cover to your nominee in case of your untimely death, which can help them take care of their financial needs.
Protect your Assets: If you have taken a loan like a personal loan, education loan, or home loan, the repaying of loans can stress your family in your absence. The money from your term insurance for home loan covers your loans, ensuring your family doesn't have to deal with the financial responsibility.
Lifestyle-related risks: As you age, the risk of a lifestyle-related illness increases. Certain term insurance plans include critical illness protection, which safeguards your family in unexpected situations and provides financial security during your lifetime. To explain the term insurance meaning, this plan ensures you're financially protected if you face severe health conditions like cancer or heart attacks.
Security against Financial Emergencies: Your family can use the term insurance payout amount to take care of any financial emergencies that may arise in your absence. This includes hospitalisation, loan repayment, or any other emergencies.
Affordable Premiums: The premiums for term life insurance are one of the most affordable types of life insurance. The premiums for a 1 crore term insurance start from Rs. 487 per month.
Income Replacement: The term insurance payout can help your family replace your income in your absence. This is especially beneficial for families where the policyholder is the main breadwinner.
Tax Saving Benefits: The Income Tax Act, 1961 offers term insurance tax benefits as per the prevailing tax laws under sections 80C and 10(10D).
After understanding what is term insurance and its benefits, let us take a look at the different types of term insurance plans you can choose from based on your financial needs.
The sum assured in an increasing term insurance increases at a fixed rate every year at the policy anniversary. These plans generally have slightly higher premiums, but help combat inflation by ensuring that your coverage grows to match rising costs.
The sum assured in an increasing term insurance increases at a fixed rate every year at the policy anniversary. These plans generally have slightly higher premiums, but help combat inflation by ensuring that your coverage grows to match rising costs.
In a decreasing term insurance plan, the life cover reduces over the years. This option is ideal for individuals with high financial obligations such as loans or child-related expenses, which are expected to decrease over time. While the life cover declines, the premium remains constant throughout the policy term.
A Term Insurance with Return of Premium (TROP) plan refunds all the premiums paid upon policy maturity. If the policyholder outlives the policy term, up to 200% of the premiums paid during the policy tenure are returned on survival, which allows customers to fulfil their financial needs later in life.
During the policy term, a convertible term insurance plan offers the flexibility to convert the policy into another insurance type, such as an endowment plan or a whole life insurance policy. This option is ideal for those who want to leave a financial legacy for their family in their absence.
The definition of term insurance for NRI is that it is specially designed term plan for NRIs that provides financial protection applicable globally to the family of the NRI customers. These plans are much more affordable than international term plans, and offer an 18% GST waiver and 5% additional discount on annual premium pay mode.
Term Plans
Now that we have understood what is term insurance plan, you should also be aware of the term insurance meaning for your family members by going through the features of term insurance plans. Here is a list of some key features of term insurance plans in India:
Large Life Cover at Low Premiums: Term insurance plans are affordable. The premium amount you must pay for term insurance plans is typically much lower than other life insurance policies. You can get 1 crore life cover for a monthly premium of Rs. 478.
Entry Age: With the 18 years of minimum eligibility, you can buy term plans at a young age. Buying a term insurance plan early helps you get sufficient coverage at minimal premiums.
Policy Term: Term plan provides coverage for a specific number of years, called policy term. Your nominee will get the life cover in your policy in case of unfortunate events during the policy term. The policy terms can start from 5 years up to the 99th birthday if you select the option of whole life insurance. You can choose the appropriate policy term based on how long your loved ones may require financial support.
Maturity Benefits: The term plan with return of premium and no cost term insurance plans allow customers to receive all the premiums paid back at the termination of the policy. This repayment of the premiums are often referred to as the maturity benefit in term insurance meaning.
Flexibility in Paying Premiums: Term plans allow you to pay premiums at your convenience. You can pay the premiums yearly, semi-yearly, monthly, and quarterly. Also, you can select the most suitable premium payment term from a one-time, regular payment or limited premium payment option.
Additional Cover: Many insurers provide the option of enhancing the base sum assured of the term plan during the policy term. For example, you can increase the sum assured after getting married, having a child, or buying a new house on loan.
Riders: Before you add riders to the base plan, you should understand what is term insurance rider first. You can add term riders to your term plan to increase the coverage amount of your base plan at affordable rates. Here are the different term insurance riders available in India:
Accidental Death Rider
Accidental Total Permanent Disability Rider
Terminal Illness Rider
Critical Illness Rider
Waiver of Premium Rider
Hospicare Rider
Additional Cover: Many insurers provide the option of enhancing the base sum assured of the term plan during the policy term. For example, you can increase the sum assured after getting married, having a child, or buying a new house on loan.
Attractive Features: While understanding the term insurance meaning, many people find out that some insurers offer industry-first features like voluntary top-ups, premium breaks, housewife insurance, and financial surrogates for people with low income backgrounds.
Flexibility in Paying Premiums: Term plans allow you to pay premiums at your convenience. You can pay the premiums yearly, semi-yearly, monthly, and quarterly. Also, you can select the most suitable premium payment term from a one-time, regular payment or limited premium payment option.
Tax Benefits: As tax-payers, you can claim term insurance tax benefits under section 80C and 80D of the ITA, 1961. However, you should always consult with your financial advisor to get a better understanding of the tax benefits applicable for your profile.
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Let us now understand what is term life insurance and how does it work. Term insurance plans work by providing life coverage for a fixed term, and in turn, the policyholder has to pay regular premiums. These premiums can be paid for a specific period of time or the entire policy period, depending on the premium payment term you choose.
Let us understand how term insurance works with the help of an example:
Apart from learning what is term insurance, here is a list of term insurance factors to consider and choosing the company to buy the term insurance plans in India.
Claim Settlement Ratio (CSR): CSR indicates the total death claims settled by an insurance company annually. The higher the CSR, the better the reliability and credibility of the company.
Solvency Ratio: This ratio indicates the financial strength of the insurance company to settle claims. Always buy from an insurance company whose solvency ratio is at least 1.5.
Additional Benefits: Choose a term insurance plan that offers multiple benefits such as accidental death benefit, income replacement benefits, and waiver of premium.
Cover Amount: You should assess your needs and ask the question â€what is term life insurance cover that is right for me?’ You should determine the amount you want covered based on your age, loan liabilities, income and lifestyle.
Critical Illness Cover: Buy a term plan with a critical illness cover. This can help cover the high medical treatment costs in case of a critical illness.
Note - It is suggested to use term insurance calculator to calculate the insurance coverage amount that would be required to protect your family financially.
If you are confused about how much term insurance life cover you need, you can get the answer to your question by using a Human Life Value calculator. HLV is an easy-to-understand numeric process of calculating the life cover amount that you need. According to the general thumb rule, the answer to the â€what is term life insurance cover for me?’ is that you should buy a term insurance cover that is at least 15 to 20 times your current annual income. This amount should be sufficient to meet future requirements and manage the rates of inflation.
For example, if a 30 year old male has an annual income of Rs. 5 Lakhs, the right life cover for him would be 1.25 Crores.
Before deciding which term plan to buy, you need to learn about the term insurance meaning. To understand the term insurance definition, you need to ask, “What is term insurance?” Term insurance is one of the most affordable types of life insurance plans and ensures your family’s financial stability in your absence. You can easily compare and buy term plans online from Policybazaar and get high life cover at low premiums.
Updated on: Jun 13, 2025
˜Top 5 plans based on annualized premium for bookings made on https://www.policybazaar.com in the first 6 months of FY 24-25.
Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
+Rs. 487/month (Rs.16/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 38 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
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+Rs. 820/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 38 years of age.
+Rs. 1,443/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 38 years of age.
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