Term Insurance - Is It an Investment or Just an Expense?

Written by : Knowledge Centre Team

2026-02-28

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6 minutes read

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When it comes to giving money away, it is but natural to think of returns on investment. The same applies to insurance, too. Many times, people put it in the same category as pure investment tools, like mutual funds. However, you can’t exactly add term insurance to this list. Does that mean a term insurance policy is simply an expense? Not really. Let us see why.

Key Takeaways

Term insurance isn’t just an expense; it’s a critical investment in your family’s financial security.
Younger buyers pay lower premiums, making it a cost-effective long-term decision.
It provides no maturity benefit, but offers a high sum assured at a low cost.
Unlike FDs, term insurance accounts for life’s unpredictability and inflation.
The iSelect Smart360 Term Plan by Canara HSBC Life Insurance offers flexible cover, spouse inclusion, monthly payouts, and tax benefits.

What is Term Insurance?

As the name suggests, a term insurance policy offers life cover for a specific term, which could be 5 years, 15 years, 20 years, etc. If the policyholder passes away within the policy term, their family will receive the sum assured, no matter at which point of the term death takes place.

For example, you take a policy of 15 years at the age of 25 years, with a sum assured of ₹.25 lakhs. You will have to keep paying regular premiums for the entire 15 years. If, unfortunately, your death occurs at the age of 35, your family receives ₹25 lakhs.

If you haven’t insured your family against such an untoward incident, you should definitely check out the iSelect Smart360 Term Plan by Canara HSBC Life Insurance. This online term plan offers a minimum sum assured of ₹.25,00,000, along with the option of getting a cover for your spouse as well. It also offers the option of whole or part of the death benefit in the form of regular monthly income to the family.

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The catch

The catch is that if you live out the policy term, there is no maturity benefit on completion of the term. You do have the option of renewing the policy for another few years. If death occurs within this extended period, your family still receives the sum assured.

What People Usually Think

These are some of the common thoughts that make people hesitate when considering term insurance:

Paying thousands of rupees each year with the possibility of not getting any of it back is futile.
What if I outlive the policy term and the need to use the sum assured never arises? That puts me at a loss.
If I want to safeguard my future, I can always put my money in a fixed deposit or a recurring deposit instead of a term insurance policy, and also earn interest on it.

It is too pessimistic to invest so much in an insurance policy against premature death.

The reality

Here’s a clearer perspective that often gets overlooked when evaluating term insurance:

Investment in Security: It is important to understand that returns on investment cannot just be calculated in terms of a monetary benefit or profit. When you take a term insurance, you are investing in the safety and security of your family, especially when they are dependent on you. It is an investment in the mental peace that you get out of the assurance that your family will be taken care of.
Cost vs. Potential Returns: Firstly, term policies are low-cost. The premiums are minimal while the sum assured is very high. Hence, outliving the policy term is not going to put you at a huge loss. Besides, you can always renew your policy and continue to enjoy the security of a life cover.
Fixed Deposit vs. Term Insurance Policy: A fixed deposit might sound like a good plan at the moment. However, the maturity amount that seems high at the moment is not going to have the same value in, say, a decade from now. Fixed deposits do not factor in inflation. On the other hand, a term insurance promises a high sum assured with low investment.
The Unpredictability of the Future: It might sound a little pessimistic to assume that you will be no more in the next few years. However, it is not impractical. It is a real possibility, and if it arises, your family will be saved from at least one reason to worry, which is finance. Ensuring that they have this sense of stability and peace is only reasonable.
Financial Freedom for Family: There is no restriction on how your family spends the sum assured. They could use it for your last rites, rituals, educational expenses, daily needs, or any other purpose they wish. With plans that also offer to pay out a part or all of the sum assured in regular monthly payments, they will be secure and peaceful for the long run.
Tax Benefits You Shouldn’t Ignore: Apart from providing peace of mind, term insurance also offers some financial relief during tax season. Under Section 80C of the Income Tax Act, the premiums paid towards a term insurance policy are eligible for a deduction of up to ₹1.5 lakh per annum. Additionally, the death benefit received by the nominee is tax-free under Section 10(10D), which means your family won’t have to worry about tax deductions eating into the sum assured.
When you weigh this against the cost of premiums, the value becomes even clearer. You’re not just securing your family’s future, you’re also making a smart move for your present-day finances.

Now that we have cleared the air around term insurance, let us see who it is really beneficial for and if you, as an individual, should consider investing in a term plan.

Who Should Consider Term Insurance?

Term insurance is often misunderstood as a product meant only for older individuals or those with significant assets and liabilities. However, the reality is quite different. Term insurance is a foundation of smart financial planning, and it holds relevance across different life stages and financial situations.

Young Professionals Starting Their Careers: If you’re just beginning your professional journey, term insurance may not seem like a priority, but this is actually the best time to buy it. Why?
1. Lower premiums: Your age and health status significantly influence premium costs. The younger and healthier you are, the more affordable your policy will be.
2. Future security: Even if you don’t have dependents now, locking in a low premium today ensures you’re covered in the future when responsibilities increase.
Newlyweds and Young Couples: When you start a life with your partner, your financial responsibilities often become shared. Whether it's rent, home loans, or future goals like children’s education or travel, your partner may rely on your income.
1. Term insurance ensures that in your absence, your partner is not left with financial burdens.
2. Many plans, like the iSelect Smart360 Term Plan by Canra HSBC Life Insurance, even offer joint life coverage, so both spouses can be protected under one plan.
Parents with Growing Families: Raising children entails long-term commitments, including education, healthcare, and a safe home environment. A term insurance policy acts as a safety net, ensuring that your children’s dreams and daily needs are not compromised, even if life takes an unexpected turn.
You can choose plans with monthly income options for your family, which helps maintain a regular flow of money for school fees, groceries, and more.
Sole Breadwinners or Single Parents: If your family depends solely on your income, term insurance is non-negotiable. It offers peace of mind knowing that your loved ones won’t have to struggle financially in your absence.
It can cover everything from loan repayments to day-to-day living expenses, preserving your family’s standard of living.
Homeowners and Loan Borrowers: If you’ve taken a home loan, personal loan, or any sizable financial liability, term insurance can shield your family from repaying the outstanding amount if something happens to you.
This is especially important if you’ve listed a family member as a co-applicant or loan guarantor.

Wrapping Up

We have a final verdict- Term insurance is not just an expense, it's a responsible step toward protecting your family's financial future. It may not offer traditional investment returns, but it delivers something far more valuable: peace of mind, security, and the assurance that your loved ones will be financially protected in your absence.

If you're ready to take that step, consider the iSelect Smart360 Term Plan by Canara HSBC Life Insurance. It offers a host of thoughtful features such as:

The option to increase your cover every 5 years
Built-in accidental death and disability riders
Tax benefits under current laws
Flexible payout options, including monthly income for your family

Whether you're a young professional, a parent, or the sole earner in your household, this plan can adapt to your evolving life stage and needs. So don’t wait. Secure your family’s future today with a term plan that understands real-life responsibilities.

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.