Term Insurance as a Diwali Gift: What Actually Works

Diwali 2026 falls on Sunday, 8 November, with Dhanteras on Friday, 6 November. Dhanteras is traditionally the day Indian families buy something lasting, and a growing number now use the festive window to sort out financial protection rather than another box of sweets. As per annual audited figures submitted to IRDAI for the year FY 25-26, settled 98.86% of individual claims along with 630+ crore total claims settled.

There is one thing to be clear about before anything else, because most articles on this topic get it wrong.

A Life Insurance cannot be a surprise gift. If the person you want to cover is the life insured, they have to sign the proposal form themselves, disclose their own medical history and consent to underwriting. You cannot buy a policy on someone's life and hand it over wrapped. What you can do is described below, and it is arguably a better gift anyway.

Why is Term Insurance important for your family?

Because it is the only financial product that pays its full value from day one. Your savings are worth what you have accumulated so far. A Term Plan pays the entire sum assured even if you have paid a single premium.

For a household with one primary earner, that difference is everything. If the income stops, the family does not just lose a salary; they start liquidating whatever has been built, often at the worst possible time, to cover school fees, EMIs, and daily costs. Term insurance is what stops that from happening. It replaces the income so the savings can stay saved.

That is what makes it a genuinely meaningful thing to sort out during Diwali. Not because it is festive, but because it is the one purchase in the season that keeps working long after the diyas are put away.

What is a Term Insurance Life Policy?

Term Insurance is the simplest form of Life Insurance Policy. You choose a sum assured and a policy term, you pay a premium, and if the life insured dies during that term, the insurer pays the nominee the agreed amount. There is no investment component, which is exactly why the cover is so large relative to the premium.

Riders such as critical illness or accidental death benefit can be added at inception for an additional premium, to cover risks the base death benefit does not.

Which 3 things work as a Diwali gift?

1. Buy cover on your own life and name your family as nominee

This is what most people actually mean when they talk about gifting Insurance to a spouse, and it is the simplest route. You are the life insured, you complete the underwriting, and your spouse and children are the beneficiaries. Nothing about it requires them to do anything, so it is the closest thing to a true gift in this category.

Size it properly. The working convention is a sum assured of 10 to 15 times your annual income, adjusted for outstanding loans and your dependants' ages. For most urban earners in 2026 that lands at Rs. 1 crore or above. Run your own figure through the ABSLI HLV Calculator rather than guessing.

2. Fund a policy your spouse takes out on her own life

If your spouse is the one you want covered, she has to be part of the process. She signs the proposal, she gives her own health disclosures, and she completes any medicals. You can pay the premium, and under the current tax law premiums paid for a spouse remain eligible for deduction, but only if you are on the old tax regime.

If your spouse earns, she should be covered against her own income, on the same 10 to 15 times basis you would apply to yourself. Dual income households routinely insure only the higher earner and discover the gap too late.

If your spouse is a homemaker, cover is still available, assessed against your income rather than hers. As a market convention that works out to roughly 50% to 60% of the earning spouse's annual income, though the exact limit varies by insurer and product. ABSLI's Her Care Term Plan for Women is built for this, and sits within the wider ABSLI Her Insurance range.

3. Cover both of you under one policy

The ABSLI DigiShield Plan (UIN: 109N108V13) offers a Joint Life Protection option, under which your spouse is covered as the secondary life insured on the same policy, with a sum assured equal to 50% of yours. One policy, one premium, both partners covered. Note that riders are not available with the Joint Life Protection option.

For a single earner household this is often tidier than running two separate policies, and it means the conversation happens once rather than twice.

What has changed before Diwali 2026?

Individual Life Insurance premiums no longer carry GST

As per the Ministry of Finance, GST on all Individual Life and Health Insurance Policies was reduced from 18% to nil with effect from 22 September 2025. Group Term and group credit life were excluded and still attract 18%.

For an individual buying cover this festive season, that is a permanent reduction of roughly a sixth in what you pay. A premium that would have cost Rs. 11,800 all-in now costs Rs. 10,000. Any figure you see quoted "with tax" from before that date overstates the current price.

The tax section numbers have moved

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 with effect from 1 April 2026. The benefits are broadly unchanged, but the references are different.

if you are on the new tax regime, which is the default, you will not get a deduction on the premium. The exemption on the death benefit still applies under both regimes, and that is the benefit that actually matters, because it is the payout rather than the premium. Treat tax as a secondary consideration and consult your tax advisor for your own position.

Does Term Insurance pay a sum assured on maturity?

On a standard level cover plan, no. If the life insured survives the policy term, nothing is paid. That is not a defect, it is the design: you are buying protection against an event, not accumulating a corpus, and the absence of a savings element is precisely why the cover is so large for the premium.

Some variants do return money. Return of Premium options refund the total premiums paid if you outlive the term, and ABSLI DigiShield Plan Option 10 works this way, while Option 9 pays a survival benefit as monthly income after age 60. These cost more than plain level cover for the same sum assured, so you are paying for the refund.

It is a legitimate preference if the idea of paying for something that may never pay out bothers you, but per rupee of protection it is the weaker deal.

What are the claim settlement ratios for FY 2025-26?

Since the entire value of the policy rests on the claim being paid, this is the number to check before price. As per annual audited figures submitted to IRDAI for the year FY 25-26, settled 98.86% of individual claims along with 630+ crore total claims settled.

How to choose the right plan?

• Sum assured. 10 to 15 times annual income, adjusted up for Loans and dependants, down for existing assets and cover.
• Policy term. Run it to at least the age at which your dependants stop relying on you, which for most people means to retirement or slightly beyond.
• Premium. Use a Term Plan premium calculator to compare cover levels before you commit. The ABSLI Term Insurance Calculator needs only age, gender, smoking status, cover and term to give you an indicative number.
• Riders. Add at inception, since adding later usually means fresh underwriting. Critical illness is the one most worth pricing.
• Claim settlement ratio and solvency. Check both. They tell you whether the insurer pays and whether it can.
• Exclusions. Read them. Suicide within the first policy year is a standard exclusion across insurers.

Which riders are worth adding in Diwali 2026?

With the ABSLI DigiShield Plan, the available riders are ABSLI Critical Illness Rider (UIN: 109B019V03), ABSLI Accidental Death and Disability Rider (UIN: 109B018V03), ABSLI Accidental Death Benefit Rider Plus (UIN: 109B023V02), ABSLI Waiver of Premium (UIN: 109B017V03), ABSLI Surgical Care Rider (UIN: 109B015V03) and ABSLI Hospital Care Rider (UIN: 109B016V03).

Critical illness deserves the most thought. In your 30s and 40s, a serious diagnosis is statistically more likely than death, and it hits from both directions at once, stopping income while raising costs. You can opt for either the Accidental Death and Disability Rider or the Accidental Death Benefit Rider Plus, not both. Riders are not available with the Joint Life Protection option or with Plan Options 3 and 5.

Why should you buy one in October or November rather than in January?

First, premiums are set by your age and health at the point the policy is issued, and they stay there for the whole term. Every month you wait is a permanent increase, and it gives your medical record time to acquire something that triggers a loading or an exclusion. Buying in the festive window rather than the January tax rush simply means you pay less for the same cover.

Second, January to March is the busiest period for insurers because of tax season, which means underwriting queues are longer. If cover matters to you, the quieter festive window is a better time to go through the process properly rather than rushing a proposal form in the last week of March.

Key takeaways

• A policy cannot be a surprise gift. The life insured must sign, disclose, and consent
• What works is cover on your own life with family as nominee, funding a policy your spouse takes out herself, or joint life protection under one policy
• An earning spouse needs cover against her own income; a homemaker can be covered against yours
• GST on individual life premiums has been nil since 22 September 2025
• The premium deduction is now Section 123 and applies only under the old tax regime
• The death benefit exemption, now Schedule II(2), applies under both regimes
• Level cover pays nothing on maturity; only Return of Premium variants refund premiums
• Buying earlier locks a lower rate permanently, so the festive window beats the January rush