Life Insurance Plans in India - Compare, Choose and Secure Your Family’s Future

2. Savings Plan: A savings plan provides dual benefits: life coverage and a disciplined way to save for major financial goals, like funding your children's higher education or purchasing a home.  

Types of Life Insurance Policies in India

1. Term Life Insurance: Term Life Insurance provides a death benefit only if the policyholder passes away during the policy term. If they survive the term, no claim can be made, and the coverage ends without any payout. Additional coverage, like accidental death or critical illness benefits, can be added through riders.

2. Term Return of Premium (TROP): TROP is a particular type of term life insurance that comes with the additional advantage of survival benefit where all premiums paid by the insured will be paid back with GST if the insured survives the entire policy term. 

3. Whole Life Insurance: Whole Life Insurance Policy covers the policyholder until 100 years of age and ensures financial coverage throughout the policy term. 

4. Endowment Policies: Endowment Policies are type of insurance plan that combines guaranteed returns and life coverage. This type of plan offers a lump sum payout on maturity and enables the nominee to make a death claim in the event of the policyholder’s untimely death. Some endowment plans also come with the benefit of a bonus over the policy coverage. 

5. ULIP: Unit-Linked Insurance Plans (ULIPs) are wealth-building options that combine the benefits of investment and insurance. Policyholders can invest in different funds-such as equity, hybrid, or bonds, based on their risk appetite and enjoy market-linked returns. These plans come with a five-year lock-in period, offer loyalty additions, and provide features like partial withdrawals and fund switching.

6. Money Bank Policies: Money Back Policies are type of insurance plan that offers a percentage of the assured sum of the policy at regular intervals and returns the remaining portion of the corpus along with a bonus if the policyholder survives the policy term. The entire sum assured will be returned in case of an unfortunate event before the policy term. The policy also offers maturity benefits with lump sum payments. 

7. Child Plan: Child Plan ensures financial security for the child by fulfilling the child’s future goals using the return on investment. These policies offer life cover to the nominee and fund the balance premium even in the absence of the policyholder. 

8. Whole Life Policy: Whole Life Policy is a type of insurance policy that offers 99 years of coverage with family protection for an extended duration. This type of plan is best suited for policyholders with dependents and offers lifetime protection to the policyholder and their children.

9. Retirement, Pension or Annuity Plans: Retirement, Pension or Annuity Plans is a wealth-building plan for non-working years of the policyholder and offers financial protection to family members as well. This plan comes with various withdrawal options, such as a lump sum payment, regular income, or both. 

Some other types of Life Insurance policies also include:

1. Children Life Insurance Policy: Children Life Insurance Policy is a combination of savings and investment plan specially designed to meet the financial needs of the children in the future. This plan comes with intermediate withdrawal or provision of withdrawal after the child reaches adulthood. 

1. Group Life Insurance: Group Life Insurance is offered by employers, banks, NGOs, non-banking financial institutions, professional groups, and microfinance organizations to their employees or members. It provides financial support to the employee’s family in case of their untimely death. Some group insurance plans also include coverage for critical illness, disability, and outstanding loans for borrowers.

Benefits of a Life Insurance Policy

• Financial Security: Provides long-term financial protection for the policyholder's family in case of an emergency.
• Maturity Benefits: On policy completion, the insurer may offer a maturity benefit, depending on the type of policy.
• Death Benefit: In the event of the policyholder's death, the insurer pays the sum assured and any bonuses to the nominated beneficiary.
• Assured Returns: Guarantees a fixed sum after a specific term, helping cover future expenses like education or other needs.
• Tax Benefits: Premiums qualify for tax deductions under sections 80C and 80D, with tax exemptions on benefits under section 10(10D).
• Retirement Planning: Annuity policies provide a monthly pension after policy maturity, ensuring financial stability in retirement.
• Riders: Optional add-ons, such as critical illness or premium waivers, allow customization of the policy to suit personal needs.
• Wealth Creation: Some policies, like ULIPs and endowment plans, offer opportunities to build wealth alongside protection.
• Loan Facility: Certain policies allow you to borrow against the policy’s value or sum assured.
• Flexible Premium Payment: Choose from various premium payment options—monthly, quarterly, half-yearly, or annually - based on your preference.

Comparison of Different Types of Life Insurance Plans

Life insurance has gone from being a luxury to a necessity, offering essential financial security. Although overall penetration remains low in the country, more people are opting for life insurance each day. With so many options available, choosing the right policy can be overwhelming. Understanding the different types of life insurance plans is key to finding the right coverage for your needs. 

The table below will highlight and compares key aspects related to the different types of life insurance policies in India:

*Note – The term varies from plan to plan, with the numbers mentioned above reflecting an overall average.

Reasons Why You Should Invest in a Life Insurance Policy

The below listed are some of the reasons you should invest in a life insurance policy: 

• Financial security for your family: Life insurance ensures that your loved ones are financially protected in case of your untimely demise. It can cover daily expenses, outstanding loans, and future financial goals like education or marriage. 
• Debt repayment: A life insurance payout can help your family pay off liabilities such as home loans, car loans, or credit card debts without financial stress. 
• Long-term savings and investment: Certain types of life insurance, like endowment or ULIP plans, act as both protection and a tool for saving or investing, helping you grow wealth over time. 
• Tax Benefits: Premiums paid for life insurance policies are eligible for tax deductions under Section 80C, and the death benefit is typically tax-free under Section 10(10D) of the Income Tax Act. 
• Coverage for Critical Illness: Many life insurance policies offer riders for critical illnesses, providing financial support during major health issues like cancer or heart disease. 
• Affordability and Flexibility: Life insurance is available in various plans to suit different needs and budgets, making it a flexible financial solution for all stages of life. 
• Encourages Financial Discipline: Regular premium payments cultivate a habit of saving and ensure disciplined financial planning. 

How to Save Tax with Life Insurance in India?

Being insured in today’s times is of utmost importance, even if your partner is already covered. While it can’t ease emotional loss, it provides crucial financial support in difficult times. With many insurers offering various plans, it’s important to choose wisely and understand the tax benefits of the policy you select. 

• Section 80C of the Income Tax Act Deduction: Section 80C of the Income Tax Act Deduction: If you are paying premiums for your life insurance policy—or for your spouse, children, or parents, you can claim a tax deduction under Section 80C of the Income Tax Act. This applies whether your child is a minor or an adult. However, to qualify for the deduction, the premium must not exceed 10% of the sum assured if the policy was issued after 1 April 2012. 
• Section 10(10D) Maturity Deduction: If the premium amount (being paid by the policyholder) does not exceed 10% of the sum assured for plans issued after April 1, 2012, and 20% of the sum assured for plans issued before April 1, 2012, then the maturity amount that the policyholder receives at the end of the policy term will be completely exempt from tax as per Section 10(10D) of the Income Tax Act, 1961.

GST on Life Insurance Premium

Life insurance is not exempted from GST (Goods and Services Tax). The introduction of GST will have an impact on the life insurance industry. The insurance premiums will most likely increase from 15% to 18% in the insurance sector. If you are paying premiums for health, car, and life insurance, you will be affected heavily.

Life insurance premiums vary based on factors like age, health, and lifestyle. While even low premiums can offer good returns over time, not everyone qualifies for them. Some people pay less for the same coverage because their healthy habits reduce their risk, helping them secure lower premiums. 

Documents Required for Buying a Life Insurance Policy

Following are the documents you will require to purchase a life insurance policy:

1. Passport-sized photographs.
2. Age Proof (Driving License / PAN Card / Passport / SSC Certificate).
3. Proof of Residence (Passport / Telephone Bill / Electricity Bill / Ration Card / Water Bill / Voter ID).
4. Identity Proof (Ration Card / Voter ID / PAN Card / Passport / Driving License).
5. Proof of Income (Pension Pass Book / Income Tax Returns / Form 16 / Salary Slip).

How Does Life Insurance Work?

Life insurance operates on a simple principle. Here's an easy breakdown of how it works: 

• Choose a Plan: Select a life insurance plan that suits your financial needs and goals after comparing various options. 
• Pay Premiums: Decide on the coverage amount, choose a premium that fits your budget, and make regular payments to keep the policy active.   
• Ensure Peace of Mind: Enjoy the assurance that your loved ones are financially protected through the life coverage provided by the policy. 
• Claim Benefits: In the event of the policyholder's death or upon maturity, the insurer provides the promised benefits to the nominee or policyholder, as per the plan's terms.   

How Much Life Insurance Coverage is Required?

It is essential to determine the appropriate life insurance for your family members. When determining the necessary amount of life insurance coverage, you should take the following factors into account:

• Your Family's Requirements: Before selecting the appropriate life insurance, you should evaluate the financial needs of your family, including total income and total monthly costs.
• Existing Debts and Loans: The life insurance policy you choose should cover any outstanding debts or loans you may have.  
• HLV Calculation: You can obtain a precise estimate of the necessary life insurance by using the human life value calculator.
• Medical Emergencies: You should select a life insurance policy that is enough to cover any unforeseen medical or financial emergencies.  
• Income Replacement: In order to replace your income in the event of your absence, you should select an amount assured that is payable in monthly instalments.
• Changes in Your Life Stage: You should select a life insurance policy that is sufficient to cover your various life stages because your life stage could shift during the policy term.  

Life Insurance Claim Process

How to Claim Life Insurance in Case of Death?

• Inform the Insurer: Notify the insurer with details of the policyholder's death.
• Submit Required Documents: Provide the death certificate and completed claim form.
• Submit Original Policy and Discharge Form: Include the original policy document and a signed discharge form.
• Include Assigned Policy Deed (if applicable): If the policy is assigned to another person, submit the assignment deed.
• Provide Legal Proof of Claimant’s Entitlement: The claimant must submit proof of their legal right to claim.
• Provide Additional Documents (if required): Submit any extra documents requested by the insurer.

How to Claim Life Insurance After Maturity?

• Receive Bank Discharge Form: The insurer will send a discharge form for the maturity claim.
• Complete the Form: Fill out the discharge form accurately.
• Submit the Form and Supporting Documents: Submit the completed form along with any required documents.
• Receive the Sum Assured and Maturity Bonus: After processing, you will receive the sum assured along with any applicable maturity bonuses.

How to Claim Riders in Life Insurance?

• Pay Extra Premium for Rider Benefits: Ensure rider premiums are paid to activate benefits.
• Follow the Specific Claim Procedure for Each Rider: Each rider (e.g., critical illness, accidental death) may have a different claim process.
• For Death-Related Riders: Follow the same process as the death claim for death-related riders.
• For Other Riders: Submit a signed claim form along with a copy of the policy.

Documents Required for Initiating Claim Procedures

The following are the documents required for initiating claiming procedures:

1. Post-mortem reports
2. Original policy certificate
3. Death certificate issued by the local authority
4. FIR (First Information Report)
5. Claim form which dully filled and signed by the applicant
6. Bank statement
7. Cancelled cheque
8. KYC documents of beneficiary, such as copy of address proof and photo ID proof
9. Summary of hospital discharge
10. Legal proof of the person making the claim in case he or she is not an assignee or nominee

Guidelines for Beneficiaries Claiming Life Insurance

1. To claim the death benefit, the nominee must file a death claim. Obtain a claim intimation form from your insurer for physical policies or apply online for digital policies.

1. The claim intimation should include essential details like policy number, policyholder's name, place of death, insured person's name, and the claimant's name.

1. The nominee must complete the required death claim forms and provide proof of death.

1. After submitting the forms, the insurance company acknowledges the death claim.

1. Gather all necessary supporting documents. Submit the documents to the insurance company for the claim settlement process.

1. The company will review the forms and documents before making a claim settlement decision.

Factors Affecting Life Insurance Policy Premiums

Several factors influence the cost of life insurance premiums in India. Here’s a breakdown of the key determinants: 

Understanding these factors can help individuals choose the most suitable policy and manage costs effectively. 

Premium Calculation for Life Insurance 

Life insurance serves two main purposes: securing your family’s future and acting as a financial investment. In India, various policies offer tailored benefits to help policyholders maximize their returns. Below are the key factors that affect premium calculation: 

1. Age: Younger individuals enjoy lower premiums. 

1. Sum Assured: Higher coverage increases the premium. 

1. Policy Term: Longer terms may have different premium structures. 

1. Health Condition: Healthy individuals typically receive favourable rates. 

1. Lifestyle Habits: Smoking or other risk factors can lead to higher premiums. 

Accurately assessing your insurance needs and calculating premiums ensures sufficient coverage while avoiding financial strain. 

Grace Period in Life Insurance

Here are the details regarding grace period in life insurance:

1. In case the policyholder fails to pay premium on time, grace period allows them to clear the due

1. Grace period is of 30 days for life insurance plan during which premium can be paid

1. Time period of grace varies in some life insurance plans

1. The benefits of life insurance plan remain active during the grace period

Cash Value of Life Insurance Plans

The following are some of the details of cash value of life insurance plans:

1. Earning and Borrowing: This component earns interest and is available for borrowing or withdrawal.
2. Financial Flexibility: You can use the cash value as a source for loans or premium payments.

1. Wealth Building: It aids in accumulating wealth while enhancing your life cover.

1. Premium Allocation: Your premium is divided into two parts – one for wealth creation and interest earnings, and the other for financial security.

1. Maturity or Emergency: Once sufficient cash value accumulates, you can receive it at maturity or utilize it for emergency loans.

What are the Late Charges on Life Insurance Premiums?

Here are some details regarding late charges on life insurance premiums:

1. Policyholders will need to pay penalties on late charges on life insurance premiums.

1. The penalty amount varies depending on policy and the insurer.

1. To revive the policy through ‘reinstatement’, policyholders need to pay all the outstanding premiums with applicable interest rates will be applicable.

1. Late payment charges also depend on the duration for which premium payment is due.

1.  Life insurance plan can be revived within five years of last premium paying date.

How to Avoid Late Charges on Life Insurance Premiums?

The following are some of the significant points that you should remember to avoid paying late fees in life insurance:

1. Select auto-debit option so that you do not miss out on premium payments.

1. Select reminder option before premium payment date to avoid delayed payment.

1. Keep track of the premium payment reminders.

1. Opt for yearly premium payment instead of monthly payments to avoid missing out on regular payments.

Life Insurance Exclusions

The exclusions under life insurance plans may differ from one policy to another. However, there are certain exclusions that almost all policies agree with. Mentioned below are some important ones:

1. Death caused while performing criminal or unlawful activities.
2. Death caused by man-made disasters like war, riot, etc.
3. Suicide or any self-inflicted injury.
4. Death caused while participating in adventure sports or any dangerous activities like bungee jumping, rock climbing, etc.
5. Death from HIV or any other sexually transmitted diseases.
6. Death or harm caused by indulging in illegal intoxicants.
7. Death caused during the waiting period is not covered by life insurance policies.

Do’s and Don'ts of Life Insurance Policies 

Do’s of Life Insurance Policies

Don'ts of Life Insurance Policies

Keep these tips in mind to make informed decisions and maximise the benefits of your life insurance policy. 

Essential Life Insurance Terms You Should Know 

1. Policyholder: The individual who purchases the policy and pays the premiums. 

1. Premiums: The fixed amount paid by the policyholder at regular intervals (monthly, quarterly, half-yearly, or annually) to maintain the policy. 

1. Insurer: The insurance company that provides the policy assumes the risk and compensates for losses during the policy term. 

1. Policy Term: The total period during which the policyholder receives financial protection and benefits. 

1. Insured Person or Life Assured: The individual whose life is covered by the policy. 

1. Nominee or Beneficiary: The person designated by the policyholder will receive the benefits in case of a claim. 

1. Riders: Optional add-ons to enhance coverage, such as Accidental Death Benefit or Critical Illness coverage. 

1. Maturity Benefit: The payout is provided by the insurer if the policyholder survives the policy term. 

1. Death Benefit: The amount paid to the nominee if the insured person passes away during the policy term. 

1. Free Look Period: A specific period during which the policyholder can review the policy terms and cancel it without incurring surrender charges. 

1. Grace Period: An additional time frame is given to the policyholder to pay overdue premiums before the policy lapses.