Term life insurance: A cornerstone of financial security, beyond tax savings

In India, term life insurance is often misunderstood as merely a tax-saving tool, courtesy of the benefits under Sections 80C and 10(10D) of the Income Tax Act. While these deductions — up to Rs 1.5 lakh on premiums—and tax-free benefits are compelling, they should not distract us from the real purpose of term insurance: long-term financial protection for families.

For far too long, financial planning in India has been skewed towards investment-led instruments. Life insurance is typically bundled with savings-oriented products like ULIPs and endowment plans, promoting the idea of wealth creation rather than risk protection. This mindset has pushed term insurance — the most cost-effective and purpose-built form of life coverage — to the sidelines.

As a result, a majority of Indian households remain financially vulnerable. For families dependent on a single income, the sudden loss of a breadwinner can lead to severe financial distress. Routine expenses like EMIs, school fees, medical bills, and daily essentials can quickly become overwhelming.

To put this into context, the Economic Survey 2023-24 pegs India’s per capita income at Rs 2.12 lakh per annum. Consider a middle-income household:

01. Home loan EMIs and rent: Housing costs in metropolitan cities like Mumbai and Bengaluru range between Rs 3,00,000-Rs 7,00,000 per year, while even in Tier II cities, rental expenses can be as high as Rs 3,00,000 annually.

02. Children’s education: Private school fees can range from Rs 50,000 to Rs 3,00,000 annually per child, with higher education costs running into several lakhs.

03. Daily living expenses: Groceries, utilities, and transportation for a family of four can cost up to Rs 12,00,000 annually.

04. Healthcare costs: Routine medical expenses and emergency healthcare can add another Rs 60,000 annually.

Business and professional expenses: For self-employed individuals, business-related costs such as office rent, employee salaries, and loan EMIs further add to financial liabilities.

These are real numbers, based on market surveys and everyday realities. Without a financial safety net like term insurance, such households are one crisis away from losing their stability.

A key concern is not just low insurance coverage but also underinsurance. According to the National Insurance Academy, India’s insurance protection gap stands at a staggering 90%. Many individuals choose low cover amounts to keep premiums minimal, inadvertently defeating the purpose of life insurance.

Ideally, one should opt for a sum assured that is 10-15x their annual income, while factoring in existing liabilities. For instance, someone earning Rs 10 lakh annually should have a term cover of at least Rs 1–1.5 crore. Anything less puts dependents at risk of long-term financial strain.

While these gaps are concerning, there’s good news. The rise of digital insurance platforms has made term plans more accessible, transparent, and affordable than ever. At PhonePe, we’re using technology to reshape how India approaches term life cover.

Here’s how we’re making it easier for families to protect their future:

01. Pre-approved offers that reduce issuance time and facilitate easy decision making.

02. Zero-cost assurance — what you see is what you pay, no hidden fees.

03. Up to 15% discount on plans.

04. Monthly and annual premium options, so you can choose what suits your cash flow.

A relationship manager to assist at every step including plan selection, policy issuance and claim support.

We’re committed to building trust through unbiased advisory, seamless digital journeys, and consistent post-sale support. Our platform aggregates top-rated insurers, giving users a clear comparison across brands and benefits.

As India collectively moves toward the IRDAI’s vision of ‘Insurance for All by 2047’, it’s time we shift the narrative. Term insurance is not just a checkbox for tax season — it’s a cornerstone of responsible financial planning.

At PhonePe, our mission is to demystify insurance, bridge India’s protection gap, and empower every Indian household with simple, powerful, and reliable term life solutions.

Because true financial security doesn’t come from returns — it comes from reassurance.

(The author is Vishal Gupta, CEO of PhonePe Insurance Broking Services)