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Why I Bought a 10 Crore Term Insurance Plan That Pays Absolutely Nothing If I Survive -- And Why It Might Be the Smartest Financial Decision You Can Make

If I die before I turn 56, my wife will receive 10 crore rupees. If I survive past 56, I get nothing. Zero. Nada. Not a single rupee comes back to me. I made this decision at the age of 31, when I purchased a 25-year term insurance plan with a cover of 10 crore rupees. The logic was brutally simple: if something happened to me before the age of 56, my family would have enough money to live comfortably, invest for the future, and cover all major expenses including my children's education. And if I survived past 56, well, I was confident that I would have earned that 10 crore rupees myself by then anyway.

Let me say this upfront: this was not a moment of madness. My brain had not stopped working. In fact, I consider this one of the best financial decisions I have ever made in my life. In this post, I want to walk you through why I took this decision, why it might be a smart decision for you as well, and -- if you are considering buying a term insurance plan -- what factors you should keep in mind. We will talk about how much cover you need, for how long you need it, what riders you should consider, how to identify which company's insurance plan to buy, and how to ensure that the plan actually works for you in terms of coverage amount and duration. I will break all of this down with clear numbers and simple logic so that by the end, you can make an informed choice.

The Math Behind Term Insurance and Why "Premium Return" Sounds Better Than It Actually Is

My annual premium for this 25-year term plan with a 10 crore cover is approximately 93,000 rupees. Over the entire 25-year period, I will pay a total of around 23 lakh rupees in premiums. Now, when I was buying this plan, there was another option available -- the premium return variant. In that variant, if I survived until the age of 56, all the premiums I had paid would be returned to me in full. At first glance, that sounds like an undeniably better deal, does it not? You get your cover if you die, and you get all your money back if you survive. It feels like a win-win situation. But that is not how I thought about it, and here is why.

In the premium return variant, the total amount I would have paid over 25 years was approximately 44 lakh rupees. If I survived, I would get that 44 lakh rupees back at the age of 56. That sounds like a lot of money -- 44 lakh rupees coming back to you. But you have to ask yourself: what will the value of 44 lakh rupees actually be 25 years from now? To find out, you must adjust for inflation. If we assume an average inflation rate of 6 percent per year, the value of 44 lakh rupees 25 years from now, in today's terms, would be approximately 10 to 10.5 lakh rupees. That is still not a bad amount, especially when compared to the first option where I simply lose the 23 lakh rupees entirely if I survive.

But here is what most people miss: opportunity cost. If you can afford to pay the higher premium of the return variant, you should ideally take the difference between the two premiums -- which in my case was about 85,000 rupees per year -- and invest it somewhere else. Not in insurance, but in any other investment vehicle. Now, let us find out what rate of return you would need to generate on that annual investment of 85,000 rupees to end up with the same 44 lakh rupees after 25 years. The answer is approximately 5.5 percent per annum. If you invest 85,000 rupees every year for 25 years at a 5.5 percent return, you will accumulate roughly the same 44 lakh rupees, which -- adjusted for inflation -- is about 10 lakh rupees in today's money. Five and a half percent. You could earn that in a fixed deposit. You do not even need to take any market risk. This is exactly how insurance companies generate the money to return your premiums -- they invest it. They are not running a charity. They have to generate returns from somewhere to pay you back after 25 years.

Now, consider what happens if you invest that 85,000 rupees annually in an index mutual fund instead. If you earn a modest 8 percent return, the inflation-adjusted value jumps to approximately 14.5 lakh rupees in today's terms. If you manage a 10 percent return, you are looking at around 19.5 lakh rupees. Suddenly, the premium return option does not look nearly as attractive. You are essentially paying a much higher premium for the illusion of getting your money back, while the insurance company quietly invests the difference and keeps most of the upside.

To drive this point home further, consider someone who buys a term insurance plan at a later age. Suppose you buy a plan at age 23 with coverage until age 60. You will pay premiums for 37 years. In the premium return variant, your total premium outlay might be around 22 lakh rupees, and at age 60, you would get that 22 lakh rupees back. But what is the value of 22 lakh rupees after 37 years of inflation? A mere 2.5 lakh rupees in today's terms. Now, if you take the difference in premium -- approximately 24 lakh rupees over the entire term -- and invest it at just 4.5 percent per annum, you would generate the same 2.5 lakh rupees. Four and a half percent is less than what a fixed deposit offers. If you earn 8 percent instead, you would accumulate around 5.6 lakh rupees in today's value against the 2.5 lakh rupees from the insurance company. The numbers speak for themselves.

The fundamental principle here is this: term insurance is meant to be pure protection. It is not an investment product. Do not mix insurance with investment. Buy a simple, plain-vanilla term plan, and invest the rest of your money separately. The returns you generate from your own investments will almost certainly outpace whatever the insurance company offers to return to you.

Two Critical Questions: How Much Cover and for How Long?

When buying a term insurance plan, two questions matter more than anything else: how long should the term be, and how much cover should you take? Let us tackle duration first. My recommendation is that your term insurance should last until your retirement age. The reasoning is simple: until you retire, you are the primary earning member of your family. If something happens to you during your working years, your family loses its main source of income. The insurance payout is designed to replace that lost income. After retirement, your children will likely be grown up and independent. You may only need to cover your own expenses, or perhaps yours and your spouse's. The financial dependency that your family has on you during your working years diminishes significantly after retirement.

Some plans offer coverage beyond retirement -- even full-life cover that extends until you are 100 years old. The idea of being covered until you die, whenever that may be, can sound very appealing. But remember that insurance pricing is fundamentally based on probability. The insurance company calculates the probability of you dying at various ages. In India, the average life expectancy for men is about 71 years, and for women, about 73 years. By the time you approach 75 or 80, the probability of death becomes very high -- almost a near certainty. And when the probability of payout is that high, the premiums become correspondingly expensive. For full-life cover, you will end up paying an enormous amount in premiums, and the value proposition breaks down. Stick to coverage until retirement. That is the sweet spot.

Now, how much cover should you take? Eligibility is generally a function of your income status. For salaried individuals, insurance companies typically offer coverage of 20 to 25 times your annual income. So, if you earn 5 lakh rupees per year, you would be eligible for a cover of approximately 1 crore to 1.25 crore rupees. This should ideally be your baseline cover amount. However, you may want more cover depending on your specific circumstances -- outstanding home loans, children's future education and marriage expenses, and so on. Some plans allow you to increase your cover during specific life events such as marriage or the birth of a child. These are excellent features because they give you the opportunity to adjust your coverage as your responsibilities grow. Other plans allow you to increase your cover annually by a fixed percentage -- 5 percent or 10 percent -- which helps your cover keep pace with your increasing income and inflation.

It is important to remember that the cover amount does not change during the policy term. Whether you die in the first year of the policy or the last year, your family receives the same amount. But because of inflation, the value of that cover erodes every single year. A cover of 1 crore rupees today will not have the same purchasing power 20 years from now. This is why opting for an increasing cover rider -- especially if your starting cover is modest -- can be a very smart way to inflation-proof your family's financial protection. In my case, I started with a 10 crore cover, which I believed would still be a substantial amount even 25 years later, so I did not opt for the increasing cover rider. But I did include several other riders, which I will explain shortly.

Understanding Riders: The Additional Shields You Should Consider

Every term insurance policy comes with optional add-ons called riders. A rider is essentially an additional benefit that you can attach to your base policy. These riders can be incredibly valuable because they cover specific scenarios that you may be particularly concerned about and want to protect your family against.

The first rider worth considering is the Accidental Death Benefit. In a country like India, where road accidents are tragically common, this rider provides an additional payout -- over and above your base cover amount -- if your death occurs due to an accident. It is a relatively inexpensive rider that can significantly boost the financial protection your family receives in the event of an unforeseen accident.

The second -- and arguably one of the most important riders -- is the Critical Illness rider. Think about this scenario: you do not die, but you are diagnosed with a critical illness such as cancer, kidney failure, or a severe heart condition. The illness renders you incapable of earning an income. Your medical expenses mount, and your family's financial stability is threatened. But because you are still alive, your term insurance policy does not kick in -- after all, term insurance only pays out upon death. This is where the Critical Illness rider becomes a lifesaver. If you are diagnosed with a covered critical illness during the policy term, this rider provides a lump-sum payout that can help you manage medical expenses and maintain your family's financial security even when you cannot work.

The third rider is the Waiver of Premium. If you develop a condition that stops your income -- a disability, a critical illness, or any other covered circumstance -- this rider waives all your future premiums while keeping your policy active. Without this rider, you would need to continue paying premiums even when you have no income, which could force you to let the policy lapse precisely when your family needs the protection the most. The Waiver of Premium rider ensures that your coverage continues uninterrupted, regardless of your ability to pay.

Finally, there are riders that allow you to increase your life cover, either based on specific life events or at a regular frequency. As mentioned earlier, these are particularly useful if you purchase life insurance at a young age when your cover eligibility is relatively low, and you anticipate that the cover will be insufficient in the event of your death years later due to inflation and growing responsibilities. In my own policy, I have the Critical Illness rider, the Waiver of Premium rider, and the Accidental Death Benefit rider built in. I did not opt for the increasing cover rider because I started with a sufficiently large base cover.

How to Choose the Right Insurance Company

There are numerous companies offering life insurance in India. How do you select the right one? Three key metrics -- or ratios -- can help you make an informed decision, and the good news is that all of this data is publicly available through IRDAI, the Insurance Regulatory and Development Authority of India, which is the regulatory body overseeing the insurance industry in this country.

The first metric is the Claim Settlement Ratio, or CSR. This ratio tells you what percentage of claims received by a company were actually settled. Naturally, you want a company with a high CSR. The higher the ratio, the better the company is at honoring its commitments to policyholders. However, there is a nuance to CSR: it is based on the number of claims, not the amount claimed. A claim of 1 lakh rupees and a claim of 10 crore rupees are both counted as one claim each. So, a company with a high CSR might be settling a large number of small claims while rejecting larger ones.

This is why the second metric -- the Amount Settlement Ratio, or ASR -- is equally important. ASR measures what percentage of the total amount claimed across all claims was actually settled. A high ASR indicates that the company is paying out the full amounts that were claimed, not just a high number of low-value claims. You cannot view either of these ratios in isolation. You need to look at them together to get the full picture. If a company has a good CSR but a poor ASR, it means they are processing many small claims but dragging their feet on larger ones. If the CSR is poor but the ASR is good, they are only processing high-value claims and rejecting smaller ones. A company with both a high CSR and a high ASR is one that focuses on settling claims fairly, irrespective of the claim amount. That is the kind of company you want to trust with your family's financial future.

The third metric, which is personally very important to me, is the Solvency Ratio. This ratio measures a company's ability to service a large number of claims simultaneously. Normally, claims follow a predictable pattern. People are born, they live, and they pass away in a broadly predictable distribution. But sometimes, a major calamity strikes -- an earthquake, a terrorist attack, a pandemic -- and suddenly, an insurance company faces an overwhelming surge of claims all at once. The Solvency Ratio tells you how well-positioned the company is financially to handle such a scenario. A high Solvency Ratio means the company has strong financial reserves and can comfortably entertain all claims even during a crisis. A low Solvency Ratio means the company might start faltering if a large-scale event triggers a flood of claims.

In addition to these three ratios, the brand reputation of the company also matters. You want a company that will remain in business for the next 20, 30, or 40 years. You want a company with a large business size, excellent customer service, and a track record you can trust. That said, it is also worth recognizing that the insurance industry in India is very tightly regulated. Even if an insurance company were to go under, your policy would not simply vanish. Before any collapse or shutdown, the company's entire insurance portfolio would be transferred to another insurer, and you would receive proper notification and allocation. The government monitors this very closely, so you do not need to worry about waking up one day to find your policy has disappeared. Still, it is always better to invest in a company that you are confident will stand the test of time.

The Bottom Line: Term Insurance Is Not an Expense -- It Is a Responsibility

Among all the financial decisions I have made in my life, buying a term insurance plan ranks comfortably in the top three, if not the very top. I am deeply grateful to my 31-year-old self for sitting down, doing the math, and convincing myself to make this decision. Today, I live with peace of mind. I can focus on my work, my family, and my life without a constant, nagging worry about what would happen to them if I were no longer around. That peace of mind is, in itself, priceless.

My single focus now is to earn that 10 crore rupees myself by the time I turn 56 -- the same 10 crore rupees that an insurance company would have paid my family if I had passed away. And if I succeed, the premium I paid will have served its purpose anyway: it bought me 25 years of certainty, 25 years of knowing that my family would be financially secure no matter what. That is what term insurance truly is -- not an investment, not a savings plan, but a shield. And every person with financial dependents should have one.

Key Takeaways and Final Advice

• Term insurance is pure financial protection. Do not mix insurance with investment. Buy a simple term plan and invest separately.
• The premium return option may sound appealing, but the opportunity cost of investing the premium difference almost always yields better returns.
• Calculate your required cover as 20 to 25 times your annual income at a minimum. Adjust upward based on loans, children's education, marriage expenses, and other liabilities.
• Your policy term should ideally extend until your retirement age, when your family's financial dependency on you significantly reduces.
• Inflation erodes the value of your cover every year. If your starting cover is modest, strongly consider an increasing cover rider.
• Essential riders to consider: Accidental Death Benefit, Critical Illness, and Waiver of Premium. These protect you in scenarios beyond just death.
• Evaluate insurance companies using three key metrics: Claim Settlement Ratio (CSR), Amount Settlement Ratio (ASR), and Solvency Ratio. All three ratios are publicly available through IRDAI.
• A high CSR combined with a high ASR indicates a company that settles claims fairly, irrespective of claim amount.
• A high Solvency Ratio indicates strong financial health and the ability to handle a surge of claims during a crisis.
• Buy term insurance as early as possible. The younger you are when you buy, the lower your premium will be, and the longer you will enjoy peace of mind.
• Seek professional, unbiased advice if you feel overwhelmed by the choices. An independent advisory service can help you navigate the complexities and find the right plan for your specific needs.

Citations and References

• Insurance Regulatory and Development Authority of India (IRDAI) -- Annual reports and publicly available data on insurance company claim settlement ratios, amount settlement ratios, and solvency ratios. Accessible at the official IRDAI website.
• Life expectancy data for India -- World Health Organization (WHO) and Census of India reports on average life expectancy for men (approximately 71 years) and women (approximately 73 years).
• Inflation adjustment calculations based on a standard assumed long-term inflation rate of 6 percent per annum, consistent with historical consumer price index trends in India.
• Investment return projections of 5.5 percent, 8 percent, and 10 percent are illustrative, based on historical average returns from fixed deposits, equity index mutual funds, and diversified equity portfolios in India.
• Opportunity cost analysis methodology based on standard financial planning principles that separate insurance (risk protection) from investment (wealth accumulation).

Remember: insurance is not about you. It is about the people who depend on you. The question is not whether you will die -- we all will, someday. The question is whether your family will be financially secure when that day comes. A well-chosen term insurance plan is the simplest, most affordable answer to that question.