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All you need to know about term insurance

11 Mins 09 Jan 2023 0 COMMENT

Amid life’s uncertainty, protecting your loved ones has become essential and assumed the top priority for individuals. In such cases, life insurance policies play a significant role in preparing for future uncertainty. A term insurance plan is a cost-effective way to mitigate risks and offers certain benefits to an individual in securing their family financially.

In this blog, we will learn everything about term insurance plans, their types and their benefits.

What is term insurance?

Term insurance is a type of life insurance product that provides financial coverage or protection to the policyholder and their family for a specific period of time. In the event of the death of the insured person during the policy term, the death cover or benefit is paid to the nominee by the insurance company.

Term insurance is one of the simplest forms of life insurance products. It is affordable and cost-effective as the insured person, or their nominee gets a large amount of financial protection at a low premium amount. These plans are also relatively cheaper than other plans like ULIPs, endowment policies and money-back policies.

However, it is important to note that the term insurance policies’ benefits can be availed only in the event of the death of the insured person. The death benefit is paid by the insurance company to the beneficiary nominated by the insured.

Here are some of the key features and things you need to know about term insurance plans:

An individual needs to select a good term insurance plan that has wide coverage. It means the term plan coverage should have a large life cover amount and it should cover for critical illness, accidental death and disability at affordable premium rates.

The life cover amount should essentially be large. It is because the term plans work for only covered events, like death. Hence, the sum assured needs to be large enough to look out for the associated costs and expenses of the family, like living costs or any ongoing debts.

Term plans should also include more contingencies like accidental death and disabilities. It is because any disabilities can adversely impact your savings or earnings capacities with an increased cost of living.


Term Insurance: Is It the Right Choice for You?

Types of Term Insurance Plans

Level Term Insurance Plan

Level Term Insurance Plan is the most basic one where the sum assured is fixed throughout the policy tenure, and the premiums paid will also remain fixed for the entire term. The benefits will be received by the appointed nominee in the event of the death of the insured.

Increasing Term Insurance Plan

In Increasing Term Insurance Plan, the sum assured, or the death benefit, keeps increasing annually. However, the premium does not change. The policyholders here get an option to increase the death benefit annually while keeping the premium amount unchanged.

Decreasing Term Insurance Plan

In these plans, the sum assured keeps decreasing every year till the end of the policy term. The premium paid for such policies is comparatively lower than other plans.

Term Insurance Return of Premium (TROP)

As per these plans, if the insured person survives the policy tenure, he will receive all the premium amount paid to the insurer, provided all the premiums of the plan are duly paid. In the event of the death of the insured, the beneficiary will receive the sum assured, but only the premium amount will be returned if the insured survives.

Convertible Term Plans

Convertible term plans give the policyholders an option to convert the plans into a different life insurance policy in the future.

Term Plan with Riders

These plans come with rider options like accidental death cover and critical illness cover. These can be bought with the normal term insurance plan by paying a small premium amount.

Benefits of Term Insurance Plan

Check out some of the benefits of a term insurance plan:

A significant role of a term insurance plan is to offer financial security to the family of the policyholders in event of his death. Term insurance provide a lump sum amount as a death benefit to the nominee after death of the policyholder so that they can continue to meet their daily expenses and maintain a healthy lifestyle.

Term insurance plans are affordable products as the premium amount paid is relatively lower, making them cheaper as compared to other life insurance policies.

The minimum eligibility age for a term insurance plan is 18 years. Hence, individuals can get term insurance plans at a young age that will give them sizeable coverage at reasonable premiums.

Term plans also offer certain tax benefits to the policyholders. They can claim deductions up to Rs 1.5 lakh on the premium paid for a term plan under Section 80C of the Income Tax Act. The premium paid for the rider also qualifies for the tax benefits under Section 80D. Moreover, the payouts are also tax-exempt under Section 10(10D).

Term insurance plans also offer the benefit of a premium waiver, under which all future premiums are waived off in the case of a disability caused by an accident.


Term insurance plans are one of the most cost-efficient ways to secure your family financially in the future in case of any unfortunate event. The unique plan benefits and the low premium rates make term plans an attractive option for people looking for a life insurance policy.


1. What does term insurance mean?

Term insurance is a life insurance product that provides financial coverage or protection to the policyholder and their family for a specific period of time.

2. What are 2 benefits of term insurance?

Affordable premium rates and tax savings are two benefits of a term insurance plan.

3. Which death is not covered in term insurance?

Death due to self-inflicted wounds does not get covered under term insurance plans.

4. Do we get return in term insurance?

In the Term Insurance Return of Premium (TROP) policies, the policyholders get back all the premiums paid if he/she survives the entire policy term.

DisclaimerICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.