Buying your first policy?
Term or health insurance: which first?
- Which policy to buy first
- How much of each you need
- What your employer's cover leaves out
What to buy, in order
- Health insurance₹20 L
A family floater for you, your spouse and 1 child. One hospital stay can cost lakhs.
- Term life insurance₹2 Cr
Covers ₹6 L a year for 30 years and clears ₹30 L of loans.
Your inputs
Your taxOptional: old regime saves tax on your premiums
Life premiums count under 80C (₹1.5L with your other 80C) and health premiums under 80D (up to ₹50,000), old regime only.
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What this means
- Buy pure term, not endowment, money-back or ULIP plans.
Why?
Those mix insurance with low-return investing and give a fraction of the cover for the same premium.
- Your ₹5 L employer cover isn't counted. It ends with the job.
Why?
You lose it when you change jobs, retire or get laid off, often when you can least afford new cover.
- At 30, premiums are low and approval is easy.
Why?
Both get costlier and harder to get with age and any new illness.
More details
When each cover matters
Need vs have
- Gap₹20 L
- Needed₹20 L
- Employer cover₹5 L
- Savings₹5 L
- Gap₹1.83 Cr
- Needed₹1.88 Cr
Tax breaks on your premiums, a year
- Section 80C life cover, ₹1.5L cap with your other 80C₹0 deducted · saves ₹0
- Section 80D health cover, ₹50,000 cap₹0 deducted · saves ₹0
New regime: no deduction for premiums. Switch to Old to see the saving.
How it's calculated
- Health cover: ₹10 lakh for one adult in a metro, ₹5 lakh elsewhere. A spouse adds 50% and each child 25%, rounded up to the next ₹5 lakh. Only your own policy counts, because employer cover ends with the job.
- Term cover: needed only if someone depends on your income, or a spouse shares your loans. It is the money that pays your yearly expenses until you'd turn 60 (expenses rising 6% a year, the payout earning 7%), plus your loans, minus savings and existing life cover. Rounded up to the next ₹25 lakh.
- Order: health first, because anyone can need a hospital. Term goes first only when your employer's health cover already meets at least half of what you need, so you're protected while you set up term.
- Parents: if they rely on you, a separate policy for them, sized like your own base cover.
These are rules of thumb, not quotes. Premiums depend on your age, health and insurer, so compare a few before buying.
Tax on premiums (old regime only). Life premiums fill what is left of ₹1.5L under 80C; health premiums count under 80D up to ₹50,000. The saving is the deduction times your slab. The new regime allows neither.
80C saving = min(life premium, ₹1,50,000 − other 80C) × slab
80D saving = min(health premium, ₹50,000) × slab