If you start shopping for life cover in India, one number comes up again and again: one crore. Ads, agents and websites all push the 1 crore term insurance plan. But is a one crore cover right for you? Or would a smaller cover do the job at a lower cost?
This guide explains both choices in plain words. It covers how term insurance works, how to work out the cover you need, what changes on tax, and the mistakes to avoid. I have not named any insurer or plan. Rules here come from the insurance regulator IRDAI, the Finance Ministry and the income tax law. Please read this as general information, not personal advice. For your own case, speak to a registered adviser.
Table of Contents
What Is Term Insurance?
Term insurance is the simplest kind of life insurance. You pay a fixed premium for a set number of years. This period is called the term. If you die during the term, the insurer pays a fixed amount to your family. That amount is called the sum assured, or simply the cover.
If you are alive when the term ends, you normally get nothing back. IRDAI’s own handbook says so. This is the main reason term plans are cheap. You are paying only for protection, not for savings. Some plans also pay out on total and permanent disability, if they offer that benefit.
There are also plans that return your premiums if you survive. They cost much more. A plain term plan, such as the standard Saral Jeevan Bima set by IRDAI, has no maturity benefit and no surrender value. Surrender value is the money you get if you stop a policy early. The old version of this post said a one crore plan has a higher surrender value. For a pure term plan, that is wrong, since there is usually none at all.
What Does 1 Crore Term Insurance Mean?
It just means the sum assured is Rs 1 crore. If the insured person dies during the term, the nominee gets Rs 1 crore. A nominee is the person you name to receive the money.
There is nothing magic about this figure. It became popular because it is a round number that sounds large. For many families it may be the right amount. For some it is too much, and for others it is far too little.
1 Crore Cover vs a Lower Cover: The Key Differences
Premium
A larger cover costs more each year. How much more depends on your age, health, habits such as smoking, the length of the term and the insurer. A lower cover has a smaller premium, which can help if money is tight.
Medical checks
Insurers look harder at bigger covers. IRDAI’s handbook says special medical reports may be needed based on your age, the sum assured and your family and personal health history. So a one crore plan is more likely to need tests than a small one.
How far the money goes
This is the real question. Ask yourself what your family would need if your income stopped tomorrow. Think of the rent or home loan, school and college fees, daily bills and any other debts. A small cover may clear a loan but leave little for daily life. A larger cover can do both.
Inflation
Rs 1 crore today will not buy the same things in twenty years. Experts quoted by CNBC TV18 in June 2026 noted that at inflation of 6% to 7% a year, costs can roughly double in about a decade. One broker said a cover that looks right today could lose nearly half its buying power over twenty years. So pick your cover with the future in mind, not just today’s prices.
How Much Cover Do You Actually Need?
For years, planners and insurers have used a rule of thumb: buy cover worth 10 to 15 times your yearly income. By that rule, a person earning Rs 8 lakh a year would look at Rs 80 lakh to Rs 1.2 crore. Someone earning Rs 4 lakh would look at Rs 40 lakh to Rs 60 lakh.
But the same experts warn this is “a starting point, not a finish line”. Two people with the same salary can have very different needs. A better method is called Human Life Value, or HLV. It looks at what your family will lose and what they will need. Here is a simple way to think about it:
- Your yearly income, minus what you spend on yourself, for the years left until you retire.
- Plus all your loans, such as a home loan or car loan.
- Plus big future costs, like your children’s education or a child’s wedding.
- Minus your savings and any life cover you already have, such as cover from your employer.
Experts also say to review your cover every three to five years. Do it sooner after big life events, like marriage, the birth of a child, a new home loan or a big pay rise. For many city families with loans and young children, the answer can come out well above one crore.
Use an online calculator to check your loan numbers. Our post on how EMI calculators help you plan explains how they work.
When a Lower Cover Can Make Sense
A smaller cover is not always a bad choice. It may suit you if:
- You are young, single and no one depends on your income yet.
- You have no big loans.
- Your family already has good savings or property to fall back on.
- Your budget is tight right now. A small plan today is better than no plan at all.
Keep in mind that premiums are lower when you buy young. You can raise your cover later as your income and duties grow, though a new policy will be priced at your age then.
Tax Rules for Term Insurance in 2026
Tax law in India changed on 1 April 2026, when the new Income tax Act, 2025 took over from the 1961 Act. Many section numbers changed, but the main term insurance benefits stayed.
Deduction on premium
Under the old Act, this was the famous Section 80C. It is now Section 123 of the new Act. You can deduct up to Rs 1.5 lakh a year in total. That limit covers the whole basket, which includes life insurance premiums, PPF, EPF, ELSS funds, tuition fees and more. It is only available if you choose the old tax regime. Under the default new regime, you get no such deduction.
The old version of this post said a one crore policy gives a “larger tax deduction” because the premium is higher. That is misleading. The cap is the same Rs 1.5 lakh for everyone, and many salaried people fill much of it through EPF alone.
Payout to the family
Money paid to the family on the death of the insured is not taxed. This was Section 10(10D) of the old Act and now sits in Schedule II of the new one.
No GST on premiums
From 22 September 2025, the GST rate on all individual life insurance policies, including term plans, was cut from 18% to zero. This made term cover cheaper for families. Group policies, such as cover given by an employer, still carry 18% GST.
Things to Check Before You Buy
- Tell the full truth on the form. IRDAI warns that wrong statements in the proposal form can lead to a claim being rejected. Disclose any illness, smoking or drinking habits.
- Claim settlement ratio. This is the share of death claims an insurer paid out of all the claims it received in a year. IRDAI publishes these figures each year. Look at the trend over a few years, not just one year.
- Term length. Choose a term that lasts until your dependants can stand on their own, often until you retire.
- Riders. These are extra covers, such as for accidents or serious illness, added for an extra cost. Buy only what you need.
- Nominee. Name your nominee and tell your family where the policy papers are.
- Free look period. Under IRDAI’s 2024 rules, you get 30 days from receiving the policy to read it and cancel if you are not happy. You get a refund minus a few small costs, such as medical test fees and stamp duty.
For more on why this kind of cover matters, read our top reasons why a term insurance plan is important. You can also see our guides on how to save tax legally in India and tax saving plans for salaried employees.
Frequently Asked Questions
Is 1 crore term insurance enough?
It depends on your income, loans and family needs. The 10 to 15 times income rule is a quick check. A full needs based count, like Human Life Value, gives a better answer.
Do I get money back if I survive the term?
Not with a pure term plan. Plans that return premiums exist, but they cost more.
Can I claim tax benefits on term insurance premiums?
Yes, but only under the old tax regime, within the Rs 1.5 lakh yearly limit under Section 123 of the Income tax Act, 2025.
Is there GST on term insurance now?
No. Since 22 September 2025, individual life insurance, including term plans, carries zero GST.
What happens if I hide a health problem?
The insurer can reject the claim later. Always disclose your health and habits honestly.