According to reporting by Goodreturns, the way Indians buy term insurance is changing quickly, with buyers moving beyond the single goal of paying the lowest possible premium. For a household, the practical meaning is that a term plan is increasingly judged on how much cover it gives, how reliably the insurer pays, and what protection is bundled in, not only on the price of the first quote.
The headline does not carry the underlying figures, so BankCreds is not putting numbers on the trend itself. What follows is standing guidance on how term insurance works, how to size it, and how to compare plans if you are buying or reviewing one now.
If you take one thing from this story: a term plan is a promise to your family that has to still make sense years from now, so the cheapest premium is only one input into a good decision.
Key takeaways
- As reported by Goodreturns, Indian buyers are treating term insurance as more than a way to save money, and that is a healthy change if it leads to better cover decisions.
- Size your cover from your loans, dependants and goals, not from a round number or the lowest quote.
- Compare insurers on claim-paying record, policy wording and rider costs as well as premium.
- Inflation quietly shrinks a fixed sum assured, so choose a term and payout structure that account for it.
- Disclose health, income and habits honestly at purchase, because misstatement is the most common reason claims get disputed.
- If you have no dependants and no debts, term cover is optional, and a shift in buying habits is not a reason to buy.
What the reported shift in term insurance buying means
For many years, term insurance was sold and bought mainly on one axis: how cheap is the premium for a given cover. That made sense, because a pure term plan pays nothing if you outlive the policy, so buyers naturally wanted to pay as little as possible for the protection.
The reporting by Goodreturns points to buyers now looking further. In practice, that tends to mean asking a wider set of questions: is the cover large enough, will the insurer settle the claim without a fight, can the plan flex when life changes, and are there useful add-ons? None of these questions is new, but asking them before purchase rather than after a claim is the change worth encouraging.
The shift also matters because term insurance is one of the few financial products where a mistake is invisible until it is too late. An under-sized policy or a disputed claim does not show up in your statements. It shows up when your family needs the money.
How term insurance works: the basics
A term plan pays a fixed sum assured to your nominee if you die during the policy term. If you survive the term, nothing is paid back in a pure term plan, which is why the premium is far lower than for savings-linked policies. Premiums are set mainly by your age, health, smoking status, occupation, cover amount and term.
Three standing points are worth knowing:
- Premium is usually fixed for the term. The premium you lock in at purchase typically stays level, so buying younger and healthier locks in a lower rate.
- Disclosure drives claim outcomes. Under the Insurance Act, an insurer can generally question a policy on misstatement grounds only within the first three years, except in cases of fraud. Full and honest disclosure at the start is still the safest course.
- Free-look period. After receiving the policy document, you generally get a short window, commonly 15 to 30 days depending on the mode of sale, to review it and cancel if the terms do not match what you were told. IRDAI, the insurance regulator, sets these customer-protection rules.
Tax treatment is a secondary benefit, not the reason to buy. Under the old tax regime, premiums can count toward the Section 80C limit of ₹1.5 lakh, and death benefits are generally exempt in the nominee's hands, subject to conditions. Rules change, so check the current position for your situation.
How much term insurance cover do you actually need?
The old shortcut was to multiply annual income by a round factor such as 10 or 15. It is a fair starting point, but a needs-based calculation is more accurate because it reflects your real obligations.
The method is simple: add up what your family would need, then subtract what they already have.
| Item | Illustrative amount | Why it is included |
|---|---|---|
| Outstanding home loan | ₹40,00,000 | So the family is not forced to sell the house or default |
| Income replacement: 10 years of household expenses at ₹6,00,000 a year | ₹60,00,000 | Keeps day-to-day life stable while the family adjusts |
| Child education goal | ₹30,00,000 | Protects a long-dated goal from being cut short |
| Less: existing savings, investments and employer cover | −₹20,00,000 | Avoids paying for cover you already have |
| Suggested cover | ₹1,10,00,000 | Round up to the nearest available plan size |
These numbers are an example, not a recommendation. Replace them with your own. If you have a loan, the EMI calculator helps you see how the balance falls over time, and our home loan guides explain how outstanding principal is calculated. Also remember that any personal loan or other borrowing adds to the debt your family would inherit.
As a rule of thumb, more dependants, longer loan tenures and a single earner all push the required cover up. A working spouse with their own income, few debts and strong savings pushes it down.
Beyond the premium: what to compare before you buy
Two plans with the same cover and term can differ in ways that only matter at claim time. A structured comparison helps.
| Factor | What to look at | Why it matters |
|---|---|---|
| Premium | Compare quotes for identical cover, term, age, and smoker status | A fair comparison needs like-for-like inputs |
| Claim record | Ask for the insurer's claim settlement figures and read what they measure | A ratio by number of claims does not show amounts or the reasons for rejections |
| Policy wording | Exclusions, waiting periods and what counts as a valid nominee | Fine print decides disputed claims |
| Payout options | Lump sum, monthly income or a mix | A mix can protect a family that may not manage a large sum |
| Riders | Accidental death, critical illness, waiver of premium | Each adds cost; only buy those you would realistically use |
| Renewal and term | Cover up to age 60, 65 or later | Your family may depend on you beyond the age you first assume |
A sensible habit is to shortlist two or three insurers, compare the policy documents rather than just the brochure, and check the insurer is registered with IRDAI. If you use a comparison platform or an agent, confirm what you are being quoted matches the final proposal form.
Riders, payout options and the inflation problem
A fixed sum assured loses purchasing power over time. At 6 percent annual inflation, which is a plausible long-run assumption rather than a forecast, ₹1 crore of cover taken today would buy roughly what ₹31 lakh buys today after 20 years. That is why many buyers now think about the term length and payout style, not just the headline cover.
Options that address this include:
- Increasing cover plans, where the sum assured steps up at set intervals, at a higher premium.
- Monthly income payouts, which give the family a steady stream instead of one lump sum.
- Top-ups later in life, when income and responsibilities are clearer, though premiums will be higher and health conditions may affect approval.
- Riders such as critical illness or accidental death, which add protection for specific events at extra cost.
More features are not automatically better. A rider is worth buying only if it covers a risk you cannot absorb from savings or health insurance. Treat term insurance and health insurance as separate jobs: term replaces income after death, health cover pays hospital bills.
Who is affected by this shift, and who is not
Most affected: first-time buyers in their twenties and thirties, home-loan borrowers, single-earner households and parents of young children. They have the longest horizon and the most to lose from a wrong decision.
Moderately affected: existing policyholders who bought years ago on price alone. It is worth checking whether the cover still matches the loans and dependants you have now.
Least affected: people with no dependants and no debts, and retirees with a paid-off home and a comfortable corpus. For them, term insurance is optional, and the trend in buying habits is not a reason to act. If you are unsure where you stand, an eligibility check for loans or a look at the interest rates you are paying can show how large your liabilities really are.
What to do now: a practical checklist
- List your liabilities. Home loan, personal loan, car loan and any other borrowings.
- List your dependants and goals. Spouse, children, parents, and the education or marriage goals ahead.
- Compute cover. Add loans, income replacement and goals, then subtract savings and existing cover.
- Pick the term. Aim for cover until the age at which your dependants no longer rely on your income.
- Shortlist insurers. Compare like-for-like quotes, read the wording and confirm IRDAI registration.
- Disclose fully. Declare medical history, smoking, income and existing policies accurately.
- Use the free-look period. Read the issued policy against your proposal and cancel if it does not match.
- Review every few years. Revisit after a new loan, a child, or a major income change.
For daily updates on money matters that affect household planning, the news hub collects our latest coverage.
Common mistakes to avoid
- Buying on premium alone. A slightly cheaper plan is not a bargain if the cover is too small or the insurer is weak on claims.
- Hiding or rounding health facts. Non-disclosure of conditions, smoking or existing policies is a leading cause of disputes.
- Mixing insurance with investment. Bundled products often give lower cover for the money. Keep protection and investing separate.
- Forgetting the nominee. An outdated nominee or unclear details can slow a claim. Update them after marriage, a birth or a separation.
- Buying too late. Premiums rise with age, and new health issues can raise the price or lead to exclusions.
- Ignoring inflation. A cover that looks generous today may fall short two decades from now.
The outlook is straightforward: as buyers ask better questions, insurers and platforms are likely to compete more on clarity and service, and less on the lowest headline figure. That is good for customers, provided they do the sums for their own situation.
Frequently asked questions
Is the cheapest term plan always the best choice?
Not necessarily. If two plans offer identical cover, term and insurer quality, the cheaper one is better. But a low premium with weak cover, a short term or unclear policy wording can leave your family short when it matters.
How much term insurance cover should I buy?
A needs-based approach works best: add your outstanding loans, the years of household expenses your family would need and major goals such as education, then subtract existing savings and cover. A common starting shortcut is a multiple of annual income, but your real obligations should decide the final figure.
Do I need riders on my term plan?
Only if they cover a risk you could not absorb from savings or other insurance. Accidental death and critical illness riders add cost, so choose the ones you would realistically use and check that your health insurance does not already cover the same risk.
Can a term insurance claim be rejected?
Claims can be disputed, most often over non-disclosure or misstatement at purchase, or over policy exclusions. Under the Insurance Act, an insurer can generally question a policy on misstatement grounds only within the first three years, except in cases of fraud. Honest disclosure and up-to-date nominee details reduce the risk.
Should I buy term insurance if I have no dependants?
If nobody relies on your income and you have no debts that would fall on someone else, term cover is optional. It becomes more important the moment you take a loan, marry or have children.
BankCreds analysis
The most useful reading of this story is that price-only shopping is fading, and that is good news only if buyers replace it with a better method. The risk is that a new habit, such as chasing every rider or the highest cover, becomes another way to overpay.
Take a 32-year-old salaried buyer with a ₹40 lakh home loan outstanding, a spouse who does not earn, and a child aged three. A quote-first approach might land on a ₹1 crore plan because it feels round and the premium looks small. A needs-first approach adds the loan (₹40 lakh), about ten years of household expenses at ₹6 lakh a year (₹60 lakh), a ₹30 lakh education goal, and subtracts ₹20 lakh of existing savings and any employer cover. That gives roughly ₹1.1 crore, so the round number was close by luck. Change one input, say a second child, and the gap moves by tens of lakhs. The method matters more than the trend.
Who benefits: families with loans and single-income households, who get the most from a properly sized plan. Who is less affected: people with no dependants and no debts, for whom term cover is optional, and who should not buy one just because buying habits are changing. Retired people with paid-off homes and large corpuses are in the same position.
What this does not mean: it does not mean the cheapest plan is now a bad choice. If two plans give the same cover, term and insurer quality, the lower premium is simply better. Nor does it mean a big cover with many riders is automatically safer. A rider you will never claim on is still a recurring cost.
What to do this week
If you already hold a plan, check three things: is the cover still at least your outstanding loans plus a few years of expenses, does your nominee information match your current family, and is the term long enough to reach your last earning year. If not, plan a top-up now, because premiums rise with age and health conditions can affect underwriting later. Use the EMI calculator on BankCreds to see how your loan balance will fall, and revisit the cover every time a major life event or loan changes.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Sources & references
- Goodreturns — originating report https://www.goodreturns.in/personal-finance/how-gst-exemption-changed-term-insurance-buying-behavior-in-india-2026-014-1534729.html
- IRDAI — Insurance regulator that sets rules on policy disclosures, free-look periods and claims handling https://irdai.gov.in/
Source links are shown as plain text, not clickable links. Copy a URL into your browser to read the original report.
Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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