How to Buy Term Insurance? Basics of a Term Life Plan

Written by : Knowledge Centre Team

2025-12-07

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A life insurance plan is a legally binding contract under which you propose to the insurer to protect your family financially if you lose your life within the duration of the policy, in return for a certain sum of money called the premium. If your proposal is accepted by the insurer, then you become the insured and your life is covered under the policy.

Insurance companies have legal teams that oversee the contract and ensure it contains no loopholes. As a consumer, you should also make the effort to understand the terms and conditions before and after buying a term insurance plan.

To do this, you need to read the policy document and understand the terms outlined it it. This will help you to better understand your policy and leverageit to the fullest.

Also Read: What is the meaning of Term Insurance?

Key Takeaways

A term insurance plan is a legally binding contract that ensures financial protection for your family in return for a fixed premium.
Starting early can help lock in a low premium and ensure long-term savings.
Everyday lifestyle expenses often exceed the monthly premium of a ₹1 crore term plan.
Understanding terms like sum assured, riders, exclusions, grace period, and free look period helps in smarter policy usage.
Policies may have exclusions, especially for suicide, accidents under risky conditions, or delayed premium payments.

Basics of Term Insurance Contract

Term insurance is a type of life insurance policy in which the insurance company provides you coverage for a specific period. If you die within the specified period, your family is given the sum assured.

However, if you survive the policy, no benefits are payable to you, but some policies do offer you to return the premiums paid by you at the maturity of the term.

The following three are the primary term insurance conditions you should understand. These will also prove useful in understanding any other life insurance policies:

Premium: Premium is the payment you make to your insurer to keep your policy running. Various options are provided to you in which you can pay your premium. These are
1. Regular Mode
2. Single payment
3. Limited payment mode
Sum Assured: This is the sum you are covered for. Sum assured is the amount the insurer will pay to your nominee/nominees upon your death. This is the fixed amount that is decided at the time of buying the policy.
Riders: These are the additional benefits that can enhance your basic term policy’s scope. These provide cover for certain events that are not generally covered by the general policy. Critical illness rider, accidental death rider are some of the examples.

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Exclusions in a Term Life Insurance Policy

Exclusions in insurance are the conditions that define the criteria under which your policy may not be eligible for a claim. Some common exclusions are as follows:

Suicide Clause: In case you or your spouse dies from suicide within 12 months from the commencement of the policy, then you are not liable to receive the sum assured. In this case, your nominee will only receive a higher of
1. Up to 80% of the total premium paid by you before your death
2. Surrender value at the time of death
Exclusions for Accidental Death: The accidental death benefit is provided when the death is directly due to an accident. The following things are excluded from the accidental death benefit, which means that under these cases, the accidental death benefit will not be provided.
1. If you have been diagnosed with any injury-related condition and are receiving treatment within 48 months before buying the policy.
2. If you die due to suicide or any self-inflicted injury
3. If you are flying in a plane other than as a passenger
4. If you die during a war (declared or not) or in the midst of a strike
5. Death arising due to the consumption of drugs not prescribed, and alcohol
6. Involvement in military, air force, or paramilitary forces
7. If the cause of your death is exposure to nuclear radiation or any other biological reaction
8. Taking part in an activity that is criminal or illegal
9. Taking part in adventure sports such as sky-diving, rock-climbing, and mountaineering is considered risky.
Accidental Permanent and Total Disability: Accidental Permanent and Total Disability, also known as ATPD, refers to the severity of injury from an accident. The term insurance conditions define disability as a loss of any body part that can restrict your ability to work.

The cover only comes into play when:
- The condition is confirmed by a specialist
- Disability should result from an accident
- The disability must be for at least 6 continuous months
- The injury leads to any one of the following:
- Loss of two or more limbs
- Permanent loss of both eyes
- Loss of hearing in both ears
- Loss of speech

The exclusions are the same as in the case of accidental death.

Terms and Conditions Pertaining Term Insurance

There are some other terms and conditions of term insurance that you should know about. These are the following:

Grace Period: To keep the policy active, you are required to pay the premiums. If you don’t pay the premiums before the due date, then your policy can be cancelled. But sometimes due to circumstances, you may forget to pay the premiums. To cater to this problem, grace periods were introduced.
Grace period is the extra window given to you after the due date in which you can pay your premiums without cancelling your policy.In policies such as the iSelect Smart360 Term Plan, a grace period of 30 days is provided for yearly and quarterly payments.15 days' grace is provided for the monthly payment.
Free Look Period: This is a small window provided to you when you buy the policy. This is a trial period wherein you can make sure that this policy is right for you.
1. The Free-look period is generally of 15 days.
2. If, during this period, you feel that you do not want the policy, then the policy will be cancelled.
3. The premium paid by you will be reimbursed.
4. Some charges are deducted, such as maintenance and stamp duty.
Tax Benefits: Tax benefits are available as per the Income Tax Act 1961. However, these are subject to change with the changes in the act.

In policies such as the iSelect Smart360 Term Plan, the following tax deductions are applicable:
1. Deductions of up to ₹1.5 lakh on the premium paid in a year, as per the rules of section 80C of the Income Tax Act.
2. The amount received on maturity can be exempt from tax u/s 10(10)D of the Income Tax Act.
Minor as a Nominee: If the nominee appointed by you is a minor, then you have to name an appointee who will keep the money till the minor becomes an adult.

Wrapping Up

Knowing the term insurance terms and conditions is useful, as it will help you to use the policy more effectively. Understanding term insurance is not just about grasping definitions and clauses but also about recognising the value of protection, peace of mind, and planning ahead. A term life insurance plan, like iSelect Smart360, is a financial cushion that safeguards your family’s future in your absence.

From affordable premiums and flexible rider options to clear terms and tax benefits, it offers a high-value solution for a small monthly commitment. The earlier you start, the more you save, not just in money, but in stress. Take time to read the fine print, ask questions, and choose a plan that matches your life stage and responsibilities. Because protecting your loved ones shouldn’t be a reaction, it should be a decision.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.