Is Term Insurance Necessary for Your Portfolio in 2026?

Written by : Knowledge Center Team

2025-11-15

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Planning for financial stability requires a balance between investments and protection. You may focus on building wealth through equities, real estate, or mutual funds, but your portfolio remains incomplete without a solid safety net. That's where term insurance comes into the picture. It acts as a financial shield and ensures your family’s financial security during critical times. Understanding term insurance, its benefits, and how these plans strengthen your financial strategy can help you make a more confident decision this year.

Key Takeaways

You need patience and consistency to build sustainable long-term wealth
Protecting your assets with insurance keeps your financial foundation secure
Smart investing helps you balance risk, returns, and future growth
Managing debts wisely prevents wealth erosion over time
True wealth gives you freedom, peace of mind, and lasting financial security

What is Term Insurance and How Does It Work in 2025?

Term insurance is a type of life insurance that provides coverage for a fixed duration. If you pass away during this tenure, your nominee receives the death benefit. Policies typically vary from 5 to 30 years, and some plans allow you to extend your term without buying a new plan. It is focused purely on protection, offering a high sum assured at affordable premiums compared to whole life policies.

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How Term Insurance Works?

Term insurance is designed to provide pure protection for you and your family. Understanding how it works can help you make informed decisions and maximise the benefits of your policy.

Choose Your Term and Sum Assured: You select the coverage period and the sum assured based on your financial responsibilities and family needs. Longer terms provide extended coverage, while the sum assured ensures your loved ones are financially secure.
Pay Regular Premiums: Term insurance requires consistent premium payments. Missing payments may lead to policy lapse, so timely payments keep the coverage active throughout the term.
Death Benefit Payment: If you pass away during the term, the nominee receives the full sum assured. This payout is generally tax-free and can be used to cover expenses like loans, children’s education, or daily living costs.
No Cash Value: Term insurance does not accumulate cash value. You are paying purely for protection, which makes it affordable compared to other life insurance products.
Renewal and Term Extension: Some term plans allow term extension without requiring a new policy. This ensures continued protection even if your original term policy ends.

Did You Know?

In the Term Insurance Plan, the death benefit received is tax-free under Section 10(10D)

Source: Economic Times

Key Benefits of Term Insurance in 2025

Term insurance offers financial security and peace of mind for you and your loved ones. Here are the major advantages that make it one of the most trusted and essential forms of life insurance.

Comprehensive Financial Protection: Term insurance ensures your family is financially secure if something happens to you. For example, if you have a home loan or children’s education expenses, the death benefit can prevent your loved ones from facing financial stress.
Affordable Premiums for Higher Coverage: Since term insurance does not include investment or cash value components, premiums are significantly lower than whole life or endowment policies. This allows you to buy higher coverage at a fraction of the cost, ensuring substantial protection without straining your budget.
Flexibility in Terms and Coverage: You can choose a term and sum assured that aligns with your financial goals. For instance, a 20-year policy can cover your children’s education and early marriage expenses, while a 30-year policy can also protect your retirement corpus indirectly.
Tax Benefits: Premiums paid towards term insurance qualify for deductions under Section 80C of the Income Tax Act, and the death benefit is tax-free under Section 10(10D). This dual advantage reduces your tax liability while securing your family’s future.
Riders for Extra Protection: Many insurers offer add-ons or riders, like critical illness or accidental death benefits. For example, adding a critical illness rider ensures that a portion of the payout helps manage medical costs and enhance overall protection without buying a separate policy.

Common Myths About Term Insurance Plans

Many people hesitate to buy life insurance because of widespread myths and stereotypes. In reality, life insurance is a powerful financial planning tool that safeguards your family’s future. Let’s clear up some common myths so you can see the real value of life insurance.

Life Insurance is Only For Tax Savings: Tax deductions under Section 80C are an added benefit, but your life insurance offers much more. The payout ensures your loved ones remain financially secure in your absence. With maturity benefits from certain plans, you can also build a solid corpus for future goals like your children’s education, buying a home, or planning retirement.
Life Insurance is Useful Only After Demise: Life insurance is not limited to death benefits. Depending on the plan you choose, it can support you during your lifetime as well. A retirement plan can provide you with a steady income in later years, critical illness riders can help cover high medical costs, and endowment plans allow you to build assets. With the right product, both you and your family benefit from timely coverage.
Young and Healthy People Don’t Need Life Insurance: Being young and healthy does not make you immune to life’s uncertainties. Accidents and illnesses can strike at any time. Moreover, premiums are lower when you start young, allowing you to lock in substantial coverage at minimal cost. Buying insurance early also ensures your family’s financial stability while you are still building savings
Life Insurance is Only for the Wealthy: Life insurance is not just for high earners. Today, life insurance polices are tailored to all income levels. You can start with a modest sum assured and increase coverage as your income grows. Term insurance, in particular, provides extensive protection at a very low premium, making it accessible for everyone.
Employer-provided Insurance is Enough: Relying solely on employer-provided cover can leave you exposed. Such policies usually end when you leave the company or retire, and the sum assured may be too small to meet your family’s future needs. Experts recommend personal coverage worth at least ten times your annual income, adjusted for inflation. Having your own policy ensures long-term protection, regardless of job changes.

Who Should Buy a Term Insurance Plan?

A term insurance plan fits into different life stages and gives you steady coverage when your family needs it most. If you are starting your career, raising children, paying off loans, or planning for retirement, this plan ensures that your loved ones enjoy financial stability even if you are not around.

Young Professionals - In your twenties or thirties, buying term insurance early helps you secure high coverage at very low premiums. You can lock in affordable rates for the long term while protecting your growing responsibilities. By starting early, you build a strong safety net for your future and your family.
Young Parents - If you are a young parent, term insurance ensures your children’s dreams never get compromised. The payout can take care of their education, daily needs, and long-term milestones, even if you are not there. With this plan, you can focus on raising your children today while securing their tomorrow.
Home Loan Borrowers - If you have a home loan or EMIs, term insurance safeguards your family from debt in case of your absence. The payout can cover outstanding loans, ensuring your loved ones keep their home without financial stress. By choosing this plan, you protect both your assets and your family’s future security.
Sole Earners - If your family depends solely on your income, term insurance becomes your most reliable financial shield. It replaces your income, covering living expenses and long-term goals, even if life takes an unexpected turn. By securing this plan, you guarantee that your loved ones continue to live without financial worries.
Long-term Planners - If you are planning for major life goals such as your children’s marriage, higher education, or your retirement, a term insurance plan offers dependable coverage. It gives you the assurance that your family’s future is protected for the next 20 years, allowing you to focus on long-term financial milestones confidently.

Things to Check Before Buying Term Insurance in 2025

Buying term insurance in 2025 requires careful planning and informed decision-making. With several policies available, you must evaluate the following key factors to ensure your plan truly meets your needs:

Claim Settlement Ratio of the Insurer - Always check the insurer’s claim settlement ratio before choosing a policy. At Canara HSBC Life Insurance, we have a claim settlement ratio of 99.31% A higher ratio indicates reliability and a better chance that claims will be processed quickly and efficiently.
Flexibility in Premium Payment - Look for policies that offer multiple premium payment options, such as monthly, quarterly, or annual payments. Flexible payment terms help you manage cash flow and maintain uninterrupted coverage.
Coverage that Matches Your Life Goals - Ensure your sum assured aligns with your financial responsibilities and long-term goals, like children’s education, home loans, or retirement planning. Adequate coverage safeguards your family’s future.
Riders and Additional Benefits - Check if the policy offers optional riders such as critical illness cover, accidental death benefit, or waiver of premium. These add-ons enhance protection without needing a separate policy.
Policy Term and Renewal Options - Confirm the policy term and whether it allows renewal after maturity. Some insurers let you extend coverage without buying a new policy, ensuring continuous protection.
Insurer Reputation and Customer Support - Research the insurer’s market reputation and quality of customer service. Reliable support ensures the smooth processing of queries and claims when needed.
Premium Affordability and Budget Fit - Verify that the premium is affordable relative to your income. The policy should not strain your budget while still providing adequate coverage.

Conclusion

Term insurance is the backbone of financial stability and long-term planning. By offering affordable premiums, extensive coverage, and peace of mind, it ensures your family’s future is secure even in your absence. If you are looking for a reliable plan in 2025, the iSelect Smart360 Term Plan by Canara HSBC Life Insurance is a smart choice. It offers flexible terms, rider benefits, and comprehensive protection tailored to your life goals.

Glossary

Wealth Management: A structured approach to growing, protecting, and distributing your money through financial planning, investments, and insurance
Risk Management: Strategies like insurance and diversification that help protect your money from unexpected events and financial losses
Asset Allocation: The process of distributing your investments across different asset classes to balance risk and returns effectively
Estate Planning: The act of organising your assets with wills or trusts to ensure smooth wealth transfer and family security after your lifetime
Financial Freedom: A stage where your wealth supports your lifestyle and gives you peace of mind

FAQs

In 2025, term insurance remains the most affordable way to secure your family’s financial future, offering high coverage at low premiums.

Term insurance focuses purely on protection. It doesn’t build cash value but gives you maximum coverage for minimal cost.

Experts recommend at least 10–15 times your annual income, adjusted for inflation and your family’s financial responsibilities like loans, education, and lifestyle needs.

Yes. With riders like critical illness, accidental death benefit, or waiver of premium, you can customise your plan for extra protection without buying a new policy.

No. Employer coverage usually ends when you leave the job or retire, and may not be sufficient. A personal term plan like the iSelect Smart360 Term plan by Canara HSBC Life Insurance ensures long-term, independent protection.

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.