Buying Term Insurance comes down to a short list of decisions: how much cover you need, how long the policy should run, whether the insurer is one you can trust with a future claim, which riders are worth the extra premium, and whether you can comfortably afford that premium for the entire term. Missing any one of these can leave your family under-covered, or leave you paying for cover that never matched your actual needs. Here are the 10 factors worth checking before you buy:
How much Term Insurance cover do you need?
Your cover, or sum assured, should be large enough to replace your income and clear your major financial obligations if you are no longer there to earn. Start with your outstanding debts, your family's day-to-day expenses, and future costs like your children's education, then size the cover against those real numbers rather than a fixed percentage of income.
A commonly used rule of thumb is to size cover as a multiple of annual income, roughly higher for younger buyers and lower as you age, since younger buyers typically have more years of future income to replace. Treat any such multiple as a starting point, not a target. An online Human Life Value calculator or Term Insurance calculator can give you a more specific estimate based on your own numbers.
The core mistake to avoid is under-insuring, since a cover amount that looks affordable today but falls short of your family's real needs defeats the purpose of buying the policy.
How long should your policy term be?
Your policy term should run at least as long as your family would depend on your income, which usually means covering you until your planned retirement age. As a general pattern, buyers in their mid-20s often choose longer terms since more of their working life still lies ahead, while buyers in their 40s typically choose shorter terms tied to their remaining working years.
Buying early tends to work in your favour. Insurers usually price premiums lower when you are younger and generally healthier, and that premium typically stays fixed for the policy term you chose. Most insurers cap the maximum age up to which cover is available, so check this limit against your own retirement plan before finalising the term.
How do you evaluate an insurer's reliability?
Two figures matter most when judging whether an insurer is likely to honour a claim. The claim settlement ratio and the solvency ratio. The claim settlement ratio is the percentage of claims an insurer paid out against the claims it received in a given year, including any pending from the previous year.
For example, an insurer that received 100 claims and paid 95 of them in a year has a 95% settlement ratio for that period. The solvency ratio measures whether the insurer has enough financial reserves to meet its long-term obligations, including future claims. Both figures are published by IRDAI and by insurers themselves, so you can check them before you buy rather than relying on price alone.
As one reference point, Aditya Birla Sun Life Insurance Company Limited's individual claim settlement ratio stood at 98.86% for FY 25-26.
Which riders should you add to a Term Plan?
Riders let you extend a base term plan to cover risks beyond death, at an additional premium. Common options include a critical illness rider, an accidental death rider, a waiver of premium rider, and an accidental disability rider. Add only the riders genuinely relevant to your situation, for instance a critical illness rider if serious illness runs in your family, rather than bundling in every option available and inflating the premium unnecessarily.
How does inflation change your coverage needs?
A sum assured that looks adequate today buys less in real terms after 15 or 20 years, because the cost of living, education and healthcare all rise over time. For example, a sum assured of ₹1 crore may feel sufficient now, but its purchasing power will be meaningfully lower two decades from now purely due to inflation.
Outstanding liabilities like a Home Loan can also grow over time, so a cover amount that does not account for inflation risks leaving your family under-insured later even if it looked adequate at purchase. Some insurers offer increasing Term Plans, where the sum assured rises by a fixed percentage each year to help keep pace with rising costs. These typically cost more than a standard, level-cover term plan.
Should you buy Term Insurance online or offline?
Buying online is usually more convenient, is often available at a lower premium since it skips agent commissions and lets you read the full terms and conditions at your own pace before deciding. Buying offline through an agent gives you in-person guidance through unfamiliar terminology and someone to turn to later if you need help with a claim.
Neither channel is right for everyone. Choose based on whether you would rather research and compare independently or have someone walk you through the decision.
What core features should the policy have?
Beyond the base death benefit, check what else the policy actually offers: the range of policy term options, the premium payment modes available (regular, limited, or single pay), whether a conversion option lets you later switch to a Whole Life or Endowment Plan without fresh medical underwriting, and whether a terminal illness benefit pays out part of the sum assured in advance on a terminal diagnosis.
Some plans also offer a Return of Premium option, which refunds premiums paid if you survive the term but generally costs more than a standard plan.
How does a Term Plan fit your specific financial goals?
Match the sum assured to the goal it needs to cover. An amount at least equal to outstanding debts if debt clearance is the priority, your family's estimated annual living costs multiplied by the years of support they would need, or the projected cost of your children's education if that is the main concern. If your spouse depends on your income, the payout can also serve as a retirement corpus for them.
Riders such as critical illness or accidental disability cover extend this protection to health-related risks specifically. A Term Plan is a risk-protection tool, not a savings product, so treat it as one part of a broader financial plan that also includes investments, an emergency fund, and health insurance.
How much premium can you actually afford?
A policy only protects your family if you keep paying for it, so the premium needs to fit your budget without straining your other financial commitments. If a high sum assured pushes the premium beyond what is comfortable, consider a longer premium payment term, trimming non-essential riders, or comparing quotes across the payment modes available (annual, semi-annual, quarterly, or monthly) rather than reducing the cover amount itself.
Lifestyle factors such as smoking also raise premiums meaningfully, so an honest health and lifestyle disclosure at the time of purchase avoids both an inflated quote and a possible claim dispute later.
Do Term Insurance premiums qualify for tax benefits?
Premiums paid for a Term Plan can qualify for a deduction under Section 123 of the Income-tax Act, subject to the limits and conditions in force at the time. Tax rules change from year to year, so confirm the current limit and eligibility with a qualified tax advisor rather than assuming the benefit automatically applies to your specific situation.
September 15, 2026
5 mins read
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