{"id":2172,"date":"2026-09-11T13:44:03","date_gmt":"2026-09-11T13:44:03","guid":{"rendered":"https:\/\/policyghar.com\/blog\/?p=2172"},"modified":"2026-09-11T13:44:33","modified_gmt":"2026-09-11T13:44:33","slug":"what-option-should-i-choose-while-buying-a-term-plan-2","status":"publish","type":"post","link":"https:\/\/policyghar.com\/blog\/what-option-should-i-choose-while-buying-a-term-plan-2\/","title":{"rendered":"What Option Should I Choose While Buying A Term Plan?"},"content":{"rendered":"\n

A term plan<\/a> purchase is not about buying the fanciest product but ensuring the coverage in a plan mirrors reality in a family\u2019s life. More often than not, the decision tree involves only a handful of simple, practical decisions such as the sum assured your family would truly need, how many years the policy should be for, the modes of payment, and adding additional benefits in the form of riders for critical illness, waiver of premium or accidental death. Since term insurance essentially entails pure life cover for a specific term, policy selection is largely determined by the ways in which this protection is deployed in real life. The best plan therefore is invariably one that doesn’t pinch your pocket excessively while also meeting the real financial requirements of your loved ones in your absence. A good term plan feels solid to rest your shoulders on, is easy enough to handle for decades and is also adaptable to the vagaries of real life.<\/p>\n\n\n\n

1. The Sum Assured is the First Option to Select:<\/strong><\/p>\n\n\n\n

a. Sum Assured is the king- if there’s any king that has any power left in these plans! A term policy is worthless if its sum assured isn’t adequate to cover household expenses, income replacement for your dependents, and significant liabilities that will arise post your demise. Insurers typically say this in terms of providing lump-sum benefits for dependents, or even income-like benefits. Therefore, the sum assured has to reflect your family\u2019s expenses realistically.<\/p>\n\n\n\n

b. The better question to ask isn\u2019t \u2018How much can I afford to buy?\u2019 but \u2018How much will my family need if I die today?\u2019 This should include rent\/EMI, household expenses, education for children, loans, etc. And this question is why sum assured is at the top- because no rider, payout method or payment tactic can save a poor sum assured.<\/p>\n\n\n\n

2. The Policy Term is the Next Choice:<\/strong><\/p>\n\n\n\n

a. The policy term is also where a lot of people overthink. Usually, the right term, if there are financial dependents, will be the years when financial dependents require support and the years when major debts are still significant. HDFC policy insurance advice states that the term should depend on the retirement age, the time period for paying off debts, the period for supporting financial dependants and life expectancy, which is a good reminder of linking the policy term to genuine commitments.<\/p>\n\n\n\n

b. A good general guideline is to cover the core earning years and not just the next few. In providing guidance in selecting the duration of the term, many insurers, including HDFC, point to the policy term being designed to be long enough to cover, say, children’s higher education years or remain even into later ages, depending on the plan design. What matters here: to be available when most needed, rather than just when most affordable to purchase.<\/p>\n\n\n\n

3. For Most Individuals, Level Term is the Default Option:<\/strong><\/p>\n\n\n\n

a. Where the plan is available with a range of different term-style options, the most common, and usually most appropriate, option is level term. A level term policy maintains the level sum assured throughout the length of the policy, normally with level premiums to match. HDFC, in its term-insurance page, describes “level term cover” as “level sum assured for a specified duration of the policy life,” and on LIC’s Yuva Term brochure, the phrase “level sum assured” is also used to describe an option to keep the basic sum assured unchanged through the policy period.<\/p>\n\n\n\n

b. For this reason, level cover will be suitable for a broad cross-section of clients. It is simply and transparently defined; it is straightforward to incorporate into a household’s budget, and if the cover is to be explained to a family member, it is easy to do so. If there is no particular, defining reason for taking a different option, this is normally the option that I would tend to place at or near the top of the shortlist.<\/p>\n\n\n\n

4. Decreasing Term is Logically the Best Option for Loan Protection:<\/strong><\/p>\n\n\n\n

a. Decreasing term insurance is designed for a very particular requirement. As HDFC puts it, it is a scheme where the sum assured decreases over time and, if taken out along with a home loan, is ‘if the home loan element by and large decreases’. That makes it an attractive married pair when the idea is to shelter a diminishing debt instead of future family earnings.<\/p>\n\n\n\n

b. For most purchasers of term insurance as family protection, decreasing cover is not the first or even the second preference. It is more appropriate where the policy is being used really as a debt cover. If the aim is to provide the family with a bigger and more reliable rest for the future, a level term policy is probably the more straightforward solution. The reasoning is not complicated: liabilities might decline, but the family’s cost of living does not.<\/p>\n\n\n\n

5. For Those Who Want Inflation to be Managed Within the Plan, there is an Increasing Term:<\/strong><\/p>\n\n\n\n

a. An alternative is the idea of Increasing Term Insurance. HDFC mention that increasing term insurance increases the sum assured over the term of the policy so as to overcome the effect of inflation, and the New Tech Term page on the LIC website has mentioned Increasing Sum assured as one of the options under the computerised platform. It is useful when one might want a cover that increases gradually without the need to buy another policy.<\/p>\n\n\n\n

b. That option can be fair to long-term planners who are concerned that a Level Term Protection, while still affordable today, may seem on the small side towards the end of life. It normally carries a higher cost than a plain Level term scheme, and the choice is straightforward: more future cover at more cost. That is a reasonable trade to make if it is affordable and if the family needs over the long-term warrant it.<\/p>\n\n\n\n

6. The Premium Payment Term is a More Significant Decision Than It First Seems:<\/strong><\/p>\n\n\n\n

a. A further variation that is well worth considering is the premium paying term. The current product literature from LIC shows that a term plan can be financed through single, regular and limited premium payments. Max Life also outlines the same basic split: limited pay means a shorter premium-paying period, while regular pay spreads the outgo evenly over the entire policy term.<\/p>\n\n\n\n

b. Regular pay can often be easiest to budget for, as the level premiums are small and regular. This is suited to households with stable monthly cash flows and who don’t like to have one large payment to settle up front. Limited pay can work well where a customer is looking to complete the premium payments and therefore have premium payments mature early, or where a customer foresees their cash flow outweighing. However, the higher payments and the overall affordability should be monitored properly. Max also mentions that the premium payment term can, under certain circumstances, attract a discount over the total premium paid.<\/p>\n\n\n\n

c. Single premium, though not unheard of, tends to be a less natural purchase for pure term cover, as a substantial lump sum needs to be paid at the outset. It is available on some LIC and Max plans, but generally not the most natural route for most buyers in the absence of a very specific cash position or buying motivation. The more usual ‘happy medium’ tends to be a regular pay for added comfort or even a limited pay to end early.<\/p>\n\n\n\n

Pro-Tip:<\/strong> It’s often easier to keep up with regular pay when we are on a tight monthly budget. Rather than having a light month now, a heavier workload to come can make less cash more manageable in the long term.<\/p>\n\n\n\n

7. The Payout Option is Far More Important Than Most People Realise:<\/strong><\/p>\n\n\n\n

a. One point to remember with a term plan is that it isn’t necessarily required to pay out a single large lump sum. Max Life states that recently term plans have been written where a regular income-type death benefit, in addition to the lump sum benefit, can be added, which can be a very useful option in circumstances where a family wants regular help around the house on a monthly basis rather than just a lump sum.<\/p>\n\n\n\n

b. A lump sum is often most appropriate when there are immediate large expenses, debts or investment decisions which need flexibility. An income option may be more manageable when the family needs a regular income replacement in cash form each month for living expenses. A hybrid style (part of the claim is paid in lump sum, part in income) is often a good compromise. The decision hinges on whether the family needs flexibility now or planning in the longer term.<\/p>\n\n\n\n

c. For most families, I would favour a combination of lump sum and income if one is available at the plan choice. The greater flexibility would provide the family with a cushion at the outset, and a manageable cash flow once retired. If the plan doesn’t permit a combination, a rule of thumb won’t do; the real budgetary dynamics should be understood first.<\/p>\n\n\n\n

8. Riders Should Only Be Selected if They Actually Solve a Gap:<\/strong><\/p>\n\n\n\n

a. Riders are add-ons that can enhance a term plan but should be chosen cautiously. According to LIC’s official page, the company offers rider benefits like Accident Benefit Rider, Premium Waiver Benefit Rider, Accidental Death & Disability Benefit Rider, Critical Illness Health Rider, and linked accidental death benefit rider. HDFC also details similar riders in its policy information, including critical illness cover, waiver of premium and accidental death benefit.<\/p>\n\n\n\n

b. I would most likely consider waiver of premium, accidental death benefit and critical illness. For the waiver of premium, these are important in the case of a major disability or illness where you are unable to pay the insurance premiums. The add-on accidental death benefit would be beneficial for those exposed to the risk of the same. The critical illness cover would give a lump sum upon diagnosis of a covered critical illness to soften the financial blow of the same.<\/p>\n\n\n\n

c. The trick here is not to add in all the riders because there is one available. Riders are an extra, and each one has its own conditions and limits. Max states that rider(s) are generally selected at the outset and that each rider has its own set of conditions, clauses and sum assured limits. This again implies the smallest rider set possible is the smallest set that actually does close a real protection gap.<\/p>\n\n\n\n

Pro-Tip:<\/strong> Add a rider only if it actually solves a problem that the base plan does not. Additional features are only valuable if they alter a real result for the family.<\/p>\n\n\n\n

9. Although it is reassuring, Return of Premium is Not the Default Solution:<\/strong><\/p>\n\n\n\n

a. Return of premium (another term for TROP) is necessarily one of the most emotionally popular features of a policy, since it is the insurer’s way of returning the premiums paid if the policyholder lives through the policy’s term. Max has summarised this aspect well, and HDFC points out that a TROP plan remains a normal term plan throughout the term, with the protection applying to the sum assured in case of a claim made during the term.<\/p>\n\n\n\n

b. This sounds wonderful, and it is, although TROP can generally be regarded as a feature of comfort rather than necessity. This is a desirable feature if one holds the opinion that one’s money should not be “lost” in the event of no claim, but the disadvantage of a TROP plan is a premium cost generally higher than a term plan. If the insurance policy’s primary purpose is to provide the bare minimum necessary for financial security, then a standard level term plan may turn out to be the most appropriate option.<\/p>\n\n\n\n

FAQs:<\/strong><\/p>\n\n\n\n

1. Which term plan option is best for most people?<\/strong><\/p>\n\n\n\n

A level term plan will often be the most appropriate standard recommendation because the sum assured remains the same and premiums are normally fixed, so it makes the plan straightforward and easy to understand.<\/p>\n\n\n\n

2. When should decreasing term be chosen?<\/strong><\/p>\n\n\n\n

Reducing term is most appropriate where the purpose of the cover is mainly to serve a loan or other liability which reduces over time (e.g. home loan).<\/p>\n\n\n\n

3. Is return of premium worth choosing?<\/strong><\/p>\n\n\n\n

It can be worth selecting when the comfort of receiving the premiums back on survival is sufficiently important to justify paying a more expensive policy, but will not normally be the most value-efficient selection if efficiency in protection is the only aim.<\/p>\n","protected":false},"excerpt":{"rendered":"

A term plan purchase is not about buying the fanciest product but ensuring the coverage in a plan mirrors reality<\/p>\n","protected":false},"author":6,"featured_media":2174,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[73],"tags":[14,9],"_links":{"self":[{"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/posts\/2172"}],"collection":[{"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/comments?post=2172"}],"version-history":[{"count":1,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/posts\/2172\/revisions"}],"predecessor-version":[{"id":2173,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/posts\/2172\/revisions\/2173"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/media\/2174"}],"wp:attachment":[{"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/media?parent=2172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/categories?post=2172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/policyghar.com\/blog\/wp-json\/wp\/v2\/tags?post=2172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}