Money Basics · Insurance done right

Term insurance

A term insurance plan pays a fixed amount (sum assured) to your nominees if you die within the policy term. That's it. No investment component. No maturity benefit. Just pure life cover at the lowest possible cost.

Why it's the only type of life insurance worth buying

For ₹10,000–15,000 per year, a healthy 25-year-old can get ₹1 crore of coverage for 30+ years. No other instrument provides ₹1 crore of protection for that cost.

Endowment plans, ULIPs, and money-back policies combine insurance with savings, but both the insurance and savings components are inferior to buying them separately.

> ₹1 crore term plan premium: ~₹10,000–15,000/year. Same ₹1 crore endowment plan premium: ₹2,90,000–3,30,000/year. Huge difference for the same coverage amount.

How much coverage?

Rule of thumb: 15–20× your annual income. If you earn ₹8 lakh/year, minimum ₹1.2–1.6 crore coverage.

This ensures your family can invest the sum assured and live off returns without touching the principal.

How to judge an insurer yourself

The number everyone quotes is the claim settlement ratio (CSR). Claims paid divided by claims received in a year. IRDAI publishes it for every life insurer in its annual report, so you can look up any company yourself instead of trusting whatever the ad says.

Three things the headline CSR does not tell you:

• It lumps all policies together. A company's CSR is dominated by old savings and endowment policies where the payout is small. Term claims are the big-ticket ones, and those get scrutinised hardest.
• It counts claims, not rupees. Paying 99 claims of ₹2 lakh each and rejecting one of ₹1 crore still reads as 99%.
• It says nothing about how long the money took to arrive. The amount-settled ratio and average settlement time sit in the same IRDAI disclosures. Read them next to the CSR, not instead of it.

Across the established insurers this number is usually bunched within a couple of percentage points, which is tight enough that it shouldn't be the only thing you compare.

Honest disclosurethe biggest single factor in whether your claim gets paid

Most rejected term claims are rejected for non-disclosure. An unmentioned smoking habit, a pre-existing condition, an inflated income figure. Declare everything, even when it pushes your premium up. An insurer that priced you accurately has no grounds to fight the claim later.

When to buy

Premiums lock in at your age and health on the day you buy, and they never re-rate downward. A 25-year-old non-smoker sits at the bottom of that curve; a later start, a smoking habit, or a diagnosis in between all price in permanently.

The same cover is priced differently by different insurers. Aggregator sites exist precisely to put several quotes side by side, and an agent will show you the products they represent, which may or may not include the cheapest one for your profile. Comparing before you commit costs nothing; doing it afterwards means starting the medicals over.

Takeaway. Term insurance buys the most cover per rupee because nothing else is bundled into it. The common sizing heuristic is 15–20× annual income. Enough that the payout can be invested and lived off without eating into the principal. Premiums are fixed by your age and health on the day you buy.