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Term Insurance for Family

Term insurance for family is an affordable and ideal way to secure your family financially. The beneficiaries nominated receive a predefined amount if the policyholder dies unexpectedly during the policy term. This amount can relieve them of debt burdens, if any. ...Read More

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Term Insurance

What is a Family Term Insurance Plan?

Term Insurance for Family
April 16, 2025

Table of Content

 

Term insurance for family is a practical and affordable solution to safeguard your family financially against life uncertainties. The sum assured, policy term, and premium are decided at the time of policy purchase. 

The family term insurance plan provides pure protection and is designed for risk coverage alone. If anything untoward happens to you during the policy term, your family receives a lump sum payout. They can use the amount to fulfil long-term financial goals, manage recurring household expenses, and pay back outstanding loans. The death benefit is tax-exempt under Section 10(D) of the IT Act 19611, and your family receives the entire sum assured. 

You are not entitled to any monetary benefit if you survive the policy term unless you have chosen a Term Return of Premium (TROP) plan. Whether you utilise the cover or not, the policy becomes void after the term expires. On maturity, the benefit of life cover ceases.

Key Features of Term Insurance for Family

Here are some features of term insurance for family you should know before buying one.

  • Basic Protection Plan

    • It is purely a protection plan with risk coverage only. If the insured dies within the policy term, the beneficiaries receive a pre-decided lump sum amount. This financial aid from the insurance company helps them to navigate through the financial crisis that they face in the absence of a regular income stream.

  • Expanded Life Coverage

    • The family term life insurance provides expanded life coverage with add-ons like critical illness riders, accidental death benefit riders, waiver of premium riders, etc. You can add these riders to the base plan for an additional premium.

  • Affordability

    • The family term insurance plan is preferred to create a financial safety net for your family. It is more affordable than a regular life insurance plan. Compare various term plans from different insurance providers online and opt for the one that is within your budget and provides maximum coverage. 

  • Flexible Policy Duration

    • A term insurance plan for family gives the flexibility to choose the duration from 5 years to 40 years. The premium allocation depends on the length of coverage required. You can arrive at the premium for a given tenure using a term insurance calculator and choosing the affordable one.

  • Large Coverage Amount

    • A term plan for family offers a large coverage for a nominal premium. For example, a 1 crore term insurance plan is available for a premium of less than Rs. 500/-. However, the premium depends on the age, tenure, and the add-ons to the base plan.

  • Rider Benefits

    • You can leverage the benefits of add-ons like accidental death benefit riders2, critical illness riders, terminal illness riders, waiver of premium riders, etc. This will enhance the coverage for an additional premium.

Benefits of Buying Term Insurance for Family

The benefits of family term insurance are:

  • Full Coverage During Emergencies

    • Uncertainties like the unexpected death of the family’s sole breadwinner or the critical illness of the policyholder can take a toll on your savings. To avoid such circumstances term insurance with a critical illness rider is a must-have. Family members receive death benefits in the event of the insured’s death which helps them to manage the existing as well as the future financial requirements. If the   term life insurance plan has a critical illness rider, the insurer pays a lump sum amount if the policyholder is diagnosed with any critical illness included under the plan. The treatment costs and the family maintenance can be managed with this amount.

  • Can Serve as a Backup Plan for Income Replacement

    • If the policyholder is the sole earning member in the family, the regular income ceases if he/she dies. The family term insurance plan provides life cover i.e., if the insured dies during the policy tenure, the death benefit from the insurance company serves as an income replacement and provides long-term financial security.

  • Allows You to Increase Coverage at Key Life Stages

    • The responsibilities of individuals change at various life stages and it calls for an increase in the sum assured to ensure adequate coverage at every life stage. Some plans allow an increase in the sum assured by a specific percentage at every life stage to beat inflation and rising costs.

  • Preserve Your Family's Lifestyle

    • A family’s lifestyle is generally commensurate with the income.  They will be accustomed to a particular lifestyle and may have specific needs and expenses. A term plan for family ensures that they do not face a financial crisis when the earning member passes away suddenly. The death benefits of the plan enable them to preserve their lifestyle.

  • It Helps Fulfill Your Child's Dreams

    • A term plan protects the family from a financial setback they face on the untimely death of an earning member. The death benefit from the plan ensures that your child’s education is not hindered and helps fulfil your child’s educational goals. There is no defined age to buy a family term insurance. You can invest in a plan even at a later age to secure your child’s dreams.

  • Provides Major Tax Benefits

    • Apart from other benefits, the term insurance policies for family security help reduce your tax liability. You can claim tax deductions up to Rs. 1.50 lakhs under Section 80C of the IT Act of 19611. You get additional deduction benefits under Section 80D if you have opted for health insurance riders such as critical illness or terminal illness riders. Section 10(10D)1 for death benefits or maturity benefit payouts are tax-exempted.

Types of Term Insurance for Family

Insurance companies have designed various plans to meet the specific requirements of the customers. They are:

Types of Family Term Insurance

Key features and benefits

Drawbacks

Increasing Term Plans

- Death benefit i.e., the payout to the beneficiaries on the death of the policyholder increases over the plan’s tenure.

- Beats inflation and makes up for changing life-stage responsibilities.

- Premiums are higher.

- Only a life cover is provided. No survival or maturity benefit.

Level term plans

- The sum assured is fixed.

- Premiums do not change.

- Cost-effective

- Pure protection plan. No survival or maturity benefits.

Decreasing Term Insurance

- The death benefit decreases over the policy tenure.

- Suitable for covering financial obligations such as home loans.

- May not be an ideal protection plan as the coverage decreases over the policy term.

- The coverage available may not be adequate for emergency expenses of specific family needs.

Return of Premium Term Insurance

- Dual benefit for the nominee.

- On survival, the policyholder is reimbursed with all the premiums paid towards the plan.

- Premiums are high.

Convertible Term Plans

- The maturity benefit aligns with the base plan’s sum assured.

- Not affordable.

  • Level Term Plans

    • Under these family-centric term insurance plans, the sum assured and premium remain the same throughout the policy tenure. The tenure for these plans range between 5 years to 30 years. These are pure protection plans and do not offer any maturity or survival benefits. 

  • Increasing Term Plans

    • The family financial protection with term insurance increases by a particular percentage every year under these plans. These plans are perfect for those who intend an adequate coverage with changing circumstances. The percentage increase is decided at the policy purchase time and remains the same throughout the tenure. The initial insurance premium is higher to compensate for the periodical increase in the sum assured.

  • Decreasing Term Insurance

    • Unlike the increasing term plans the sum assured decreases over the duration in these   term insurance plans in India and will be zero on maturity. Opt for these plans only if your family’s needs decrease over time or if it is to cover loans wherein the liability reduces with each repayment. The premiums for these plans are the lowest and remain the same throughout the tenure.

  • Return of Premium Insurance

    • This best term plan for family is similar to the basic plan. The difference is that the nominees get the dual benefit if the insured dies during the policy term. If the policyholders survive the policy term, all the premiums paid for the entire policy term will be returned to them. The return of premium is provided as a maturity benefit and the tax exemption depends on the applicable tax laws. However, the death benefit is exempted from tax.

  • Convertible Term Plans

    • This plan is ideal for those seeking protection against future life uncertainties or those susceptible to developing health issues. This plan can be converted to a regular life insurance plan or an endowment plan. The maturity benefit of the converted plan aligns with the sum assured of the original plan. The insurance premiums for these plans are comparatively higher.

Can a Housewife Purchase Term Insurance for Family?

Housewives, whether having a career or not can protect the family in case of a mishap. Housewives are known for their management skills and they understand the family’s needs more than anybody else. The family goes through emotional and financial trauma in their absence. To prevent such situations, a housewife can purchase term insurance for family. The family can benefit the following ways with the term plan.

  • Protection against Uncertainty

    • Life is uncertain with no gender discrimination. In case of the untimely death of a housewife, the death benefit from the term insurance for family can help the family members to take care of the financial requirements.

  • Enhanced Life Insurance Coverage

    • The maximum life coverage provided in term insurance is commensurate with the human life value. If the husband has insurance policies covered up to his maximum life value and is unable to obtain further life cover, the housewife can purchase term insurance for family to provide adequate financial security to the family in their absence.

Why Should the Primary Breadwinner Buy Family Term Insurance?

When the primary breadwinner dies unexpectedly the income stream stops and the family will face a financial crisis. If he buys a family term insurance, the death benefit received will enable the family to fulfil financial goals such as children’s education, marriage, etc., They will also be able to clear the outstanding loan dues and manage the daily household expenses. The payout method can be determined during the policy purchase, depending on the family’s needs.

  • It can be a one-time lump sum payout on the death of the insured.
  • The sum assured can be paid in monthly instalments for a specific period.
  • A combination of a lump sum payment and monthly instalments.

Also, family term insurance has its own advantages. The policyholder can choose the premium payment frequency according to his cash flow. He can opt for monthly, quarterly, semiannual, or yearly payments. He can choose to make regular payments throughout the policy term for a limited period or make the payment for the entire policy term in one go.

How To Choose the Best Term Insurance for Family In India?

Consider the following factors to choose the best term insurance for family.

  • Coverage Amount

    • Term insurance for family will serve the purpose only if it is adequately covered. Factor in the annual income, monthly expenses, financial commitments, future goals, existing economic condition of financially dependent family members, etc., before deciding on the coverage amount. You can use a human life value calculator to assess the right coverage.

  • Flexible Plan Duration

    • The plan duration depends on how long you need the coverage. Sometimes, individuals obtain term insurance to protect their families against debt burdens. The tenure at such times can be equivalent to the loan repayment term. Otherwise, you can choose the term for any number of years, even up to 99 years. You can buy whole-life plans that provide coverage for a lifetime.

  • Available Riders

    • Term insurance riders for family members provide additional financial security besides the death benefit. Riders such as critical illness riders, terminal illness riders, accidental death benefit riders, return of premium riders, waiver of premium riders, etc., can be added to the base plan to enhance the coverage.

  • Claim Settlement Ratio (CSR)

    • The claim settlement ratio defines the percentage of claims settled out of the claims received in a financial year. The higher the claim ratio, the more reliable the insurance company is. Opt for an insurance company with a higher claim settlement ratio to ensure that your family does not struggle for claim settlements in the future.

  • Additional Benefits

    • You can also explore the additional benefits like a premium holiday, special exit benefit, and life stage benefit. The premium holiday benefit allows you to give a break for premium payments for a specific period without a policy lapse while keeping the policy active. Under this special exit benefit, the policyholder can choose to exit the plan after a lock-in period and get a refund of the premiums paid. Life stage benefits allow you to increase the sum assured at specific stages in life, such as marriage, becoming a parent, etc., to adapt the coverage to changing circumstances.

  • Review Policy Document

    • You should review the policy document to understand the terms and conditions of the contract. You check for the exclusions, inclusions, limitations, copays, etc., to avoid confusion at a later date and more importantly during the claim process.

  • Compare Term Plans

    • Explore different term plans available in the market. This ordeal has been made simple with all the details available online. Compare various term plans for an informed decision and to get the best deal.

How to Buy Term Insurance for Family Online?

You can now buy term insurance for family in the comfort of your home. You have to log on to the preferred insurance company’s website and follow the steps given below. Do not forget to check if the insurance company is IRDA-approved before confirming the purchase.

  • Go to the term insurance page on the insurance provider’s website.
  • Choose the term insurance for family you wish to buy.
  • Fill out the application form. Provide details such as name, address, date of birth, email ID, mobile number, gender, and any other details required.
  • Upload the KYC documents and any other documents specified by the insurance provider.
  • Click on the “Submit “ button to complete the process.
  • The representative of the insurance company will contact you and guide you through the purchase process.

Documents Required To Buy Term Insurance Plan for Family

The documents you need to submit for the purchase of term insurance for family are:

  • Address proof such as Aadhar Card, Driving Licence, Passport, Voter’s ID Card, etc.
  • Photo ID proof such as Passport, Driving Licence, etc.
  • Age Proof such as Passport, Driving Licence, Aadhar Card, Voter’s ID Card etc.
  • Two passport-size photographs.
  • Other documents required by the service provider.
  • Pan Card Is a Mandatory document required.

FAQs on Term Insurance For Family

Q. Is there any term insurance for family?

Yes. An individual or a family member especially, the breadwinner should buy a term insurance for family to secure the family financially if anything untoward happens to him. The death benefit from the insurance company enables the family to take care of future financial goals and the household expenses.

Q. What is family term life insurance?

Family term life insurance is a pure protection plan that safeguards the family financially if the policyholder meets with sudden death during the policy term.

Q. Can a term insurance plan be purchased for an individual or a family?

Yes. You can purchase a term insurance plan for an individual or a family. A family protection plan provides financial security for your family in your absence. Joint plans under family term insurance cover two individuals under a single plan (both spouses). Separate policies can be bought to cover different family members.

Q. How much coverage is needed for a family of four members? 

The coverage needed depends on the age, family medical history, life stage, existing health condition and affordability. However, the recommended coverage for a family of four is between Rs. 5 to Rs. 10 lakhs.

Q. How to decide the policy tenure for my family term insurance?

The policy tenure depends on your financial commitments, goals, loan tenures, etc. The coverage should be till the time you become financially independent. 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Author Profile Written By:
Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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