How a Term Plan Secures Your Family's Financial Future?

Written by : Knowledge Centre Team

2026-02-28

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8 minutes read

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Life insurance is one of the most important investments that an individual should consider. It provides a financial safety net to a policyholder’s family and beneficiaries in the event of their death.

Traditional life insurance policies provide protection based on periodic- often monthly- payments of a sum referred to as the premium amount. They generally offer investment options and were solicited in the past as a means of providing financial security as well as generating savings through the investment of premium payments. However, these types of policies require relatively large premium payments due to their potentially long tenure.

Term insurance plans are becoming increasingly popular for this very reason. Conventional term plans can be described as the most pureform of life insurance, providing protective cover in the event of the policyholder’s death for a fixed period of time. The duration of term plans can vary anywhere between 5 and 40 years, or longer, depending upon the age of the policyholder and the insurance provider. They also usually require a medical examination prior to issuing a policy in order for insurance companies to assess the risk they take on with each policyholder, with respect to any pre-existing medical conditions and their overall lifestyle. Term insurance generally requires smaller premium payments while offering similar or greater amounts of coverage when compared with traditional life insurance plans.

Key Takeaways

Term life insurance is a cost-effective way to secure your family’s future.
It offers flexible options like whole life cover, decreasing/increasing coverage, and return of premiums.
Premiums are tax-deductible under Section 80C, and death benefits are tax-free under Section 10(10D).
Riders enhance coverage for critical illness, accidental death, and disability.
Canara HSBC Life Insurance’s iSelect Smart360 Term Plan is a reliable and flexible choice with multiple benefits.

Traditional vs Term Life Insurance

Traditional life insurance combines insurance with savings and investment elements. While these plans offer maturity benefits, they also come with higher premiums and complex structures.

On the other hand, term insurance focuses purely on providing a financial safety net in the event of the policyholder’s death during the term. There is no savings component, which allows it to offer higher cover at significantly lower premiums.

Protect Your Family with Affordable Term Insurance

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What is Term Insurance?

Term insurance is the most basic and affordable form of life insurance. It pays out a pre-agreed sum (known as the sum assured) to the beneficiary if the policyholder passes away during the policy term.

The tenure for term insurance usually ranges from 5 to 40 years, depending on the insurer and the age of the policyholder. These plans may or may not include a return of premium or maturity benefits and are often customisable.

Benefits Of Term Insurance Plans

Term insurance plans have gained immense popularity due to their simplicity, affordability, and effectiveness in providing financial protection. Unlike traditional life insurance products, term plans focus solely on securing your loved ones' future by offering a substantial life cover at relatively low premiums. Let’s explore the key benefits that make term insurance a smart and essential choice for financial planning.

Financial Security: The core objective of a term plan is to safeguard your family’s financial future. If the policyholder passes away, the death benefit helps the family maintain their lifestyle and meet long-term obligations like education, healthcare, or debts.

This feature is particularly important for:
1. Newlyweds
2. Parents of young children
3. Individuals with home or business loans
4. Families dependent on a single income
Reasonable Premiums: One of the biggest advantages of term insurance is affordability. You can get a high sum assured (₹1 crore or more) at relatively low premiums compared to traditional insurance products.

The absence of an investment component makes term insurance lean and cost-efficient. Premiums are typically lower for:
1. Young individuals
2. Non-smokers
3. Policyholders with no critical health conditions
Flexibility: Modern term plans offer a variety of flexible features:
1. Decreasing cover: Ideal for those repaying large debts.
2. Increasing cover: Adjusts for inflation and growing responsibilities.
3. Return of Premium (ROP): Returns premiums paid if the policyholder survives the term.
4. Limited pay options: Pay for a limited period but enjoy full tenure cover.
5. Whole life cover: Coverage till age 99 or 100 in some cases.
Tax Benefits: Tax savings make term plans even more attractive:
1. Section 80C: Up to ₹1.5 lakh deduction on premiums.
2. Section 10(10D): Death benefit is completely tax-free (with conditions).
3. Section 80D: Deduction for critical illness riders.
Coverage of Additional Risks and Illnesses: Most term plans allow policyholders to add riders for:
1. Critical illness
2. Accidental death or disability
3. Waiver of premium
4. Terminal illness

These riders increase the scope of protection at a nominal additional cost.

Factors to Consider Before Choosing a Term Plan

Selecting the right term insurance plan requires careful evaluation of your current financial situation, future needs, and the offerings of various insurers. Since term plans are long-term commitments, it’s important to ensure that the policy aligns with your life goals and provides adequate support for your dependents. Here are some key factors you should consider before making your decision:

Your Financial Responsibilities: Include debts, dependents, lifestyle needs, and future goals.
Duration of the Cover: Should ideally extend until your retirement or until children become financially independent.
Claim Settlement Ratio: Always go for insurers with a high ratio.
Riders and Add-ons: Consider optional coverage as per your health and family history.
Premium Payment Frequency: Annual, half-yearly, quarterly or monthly.
Buying Online vs Offline: Online policies may offer better premiums due to reduced distribution costs.

Common Mistakes to Avoid While Buying Term Insurance

While term insurance is one of the most effective tools for financial protection, many buyers make errors that reduce the overall value or impact of the policy. Being aware of these common mistakes can help you make an informed and beneficial decision:

Underestimating the Coverage Amount: Many people choose a sum assured that seems sufficient at the moment, but do not consider long-term inflation, lifestyle changes, or future expenses. Ideally, the sum assured should be at least 15–20 times your annual income to ensure comprehensive protection.
Delaying the Purchase: Waiting too long to buy term insurance can lead to higher premiums and reduced eligibility due to age-related health conditions. Buying early not only locks in lower premiums but also offers better coverage options.
Hiding Medical Information: Some individuals withhold health conditions or lifestyle habits (like smoking) to reduce premiums. This can result in claim rejections later, leaving families financially stranded when they need the cover most.
Ignoring Riders: Riders like critical illness, accidental death, and waiver of premium enhance your policy's utility. Ignoring them to save a small amount on premiums can limit your protection against unforeseen events.
Choosing the Cheapest Plan Without Comparing Features: Price is important, but it shouldn’t be the only factor. Always compare features, claim settlement ratios, policy terms, and customer service before finalising a plan.

By avoiding these common pitfalls, you can maximise the benefits of your term insurance and ensure a smooth experience for your family in the event of an emergency.

Online Term Plans: A Cost-Effective Option

Online term insurance plans are gaining traction due to transparency, affordability, and convenience. They often:

Offer lower premiums due to the absence of intermediaries
Provide instant quotes and comparisons
Require minimal paperwork
Can be customised easily

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance’s

The iSelect Smart360 Term Plan byCanara HSBC Life Insurance is a comprehensive solution designed to cater to all types of policyholders:

Key Features:
1. Whole life cover till age 99
2. Premium return option at the end of the policy term
3. Short-term coverage starting from 5 years
4. Multiple payout options: Lump sum, monthly income, or a combination
5. Add-on riders: Accidental death, disability, critical illness
6. Online buying option: Simple and cost-effective

Whether you’re a single earner or someone with major financial commitments, the iSelect Smart360 Term Plan ensures your family stays protected at every life stage.

Final Thoughts Picking a policy that suits your needs in the long term is crucial to get the most out of term plans. Ensure that you account for liabilities such as existing debt when choosing your coverage amount, as this will allow your family members to avoid such burdens in the event of your passing. It is best to choose a coverage amount equal to or greater than 15-20 times your annual household expenses. It is also vital to account for your age at the time of soliciting the policy concerning the number of years you will be expected to remain in the workforce.

Additionally, purchasing term insurance will be easier when you are younger, as you will likely be regarded as a lower risk investment by insurance providers when compared to older policyholders. It may also be cheaper to purchase policies online as brokerage charges are often absent in such cases. Opting for the iSelect Smart360 Term Plan by Canara HSBC Life Insurance will give you a variety of options such as whole life cover, premium return and short tenures of up to 5 years to ensure your family’s financial security in any situation.

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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.