Term insurance is the simplest and usually the most affordable form of life insurance. It pays a fixed sum to your family if you die during the policy term, and nothing if you survive it. Because it carries no investment component, the premium for a large cover is relatively low, especially if you buy it young. For anyone whose family depends on their income — or who has a home loan or business debts — term insurance is a basic financial safety net. The key questions are how much cover to buy and for how long.
1. Why term insurance comes first
Many families buy small insurance-cum-investment policies and believe they are protected. In reality, the cover is often far too small to replace the earning member’s income. A pure term plan provides meaningful protection at a fraction of the cost, leaving money for separate, better-suited investments.
2. Estimating how much cover you need
There is no single formula, but a simple needs-based approach works well:
- Add the money your family would need to replace your income for the years they depend on you.
- Add outstanding loans — home loan, vehicle loan, business loans you have guaranteed.
- Add future goals such as children’s education and marriage.
- Subtract existing savings, investments and any existing life cover.
Some people use a multiple of annual income as a rough check, but a needs-based estimate is more accurate. Review the figure whenever your income or responsibilities change.
3. Choosing the policy term
Choose a term that covers the years your family depends on you — typically until your planned retirement or until major loans are repaid and children are independent. Buying very long terms adds cost without much benefit if dependants will be self-sufficient earlier.
4. Riders and options
- Accidental death benefit: an extra payout if death is due to an accident.
- Critical illness rider: a lump sum on diagnosis of listed serious illnesses.
- Waiver of premium: future premiums are waived in specified situations such as disability.
- Increasing cover or income payout options: useful for some families.
Add riders only if they address a real need; health cover itself is best handled through a separate health insurance policy. Our guide to the health insurance claim process explains how health policies work.
5. Honest disclosure is essential
Disclose your health history, habits such as smoking, occupation and existing policies accurately in the proposal form. Non-disclosure is a common reason for claim disputes. A medical check-up, if the insurer asks for it, protects both you and your family.
6. Make claims easy for your family
- Register a nominee and keep it updated.
- Tell your family about the policy and where documents are kept.
- Keep policy documents and insurer contact details in a known place, with digital copies.
- Consider the insurer’s service record and claim process when choosing.
Our family insurance checklist covers life, health, motor and home insurance together.
7. Common mistakes
Buying too little cover, delaying purchase until premiums rise with age, choosing policies only for tax benefits, and letting a policy lapse by missing premiums are the most common errors. Home buyers taking large loans should review their cover at the same time; see our home loan interest rate guide. Family succession planning, including wills, is covered by ATTPL Legal.
8. When to review your cover
- Marriage or the birth of a child.
- Taking a large home or business loan.
- A significant increase in income or lifestyle.
- Starting a business where your family depends on its success.
Additional cover can usually be bought as a new policy. Buying earlier keeps premiums lower, so review your needs every few years rather than waiting for a crisis.
Frequently asked questions
Is term insurance better than an endowment policy?
For pure protection, term insurance gives much higher cover for the same premium. Investments can be handled separately.
Can I have more than one term policy?
Yes. You can hold policies from different insurers, but disclose existing cover in each proposal.
Do term plans pay anything on survival?
Standard term plans do not. Return-of-premium variants do, but at a much higher premium.
This article is general information, not financial or insurance advice. Need help choosing cover? Contact ATTPL Finance.
